50 Startup Terms to Know
Every industry has its own vernacular. Banking, logistics, IT, agriculture, aviation — name the industry, and it will have a unique set of terms that all participants must be familiar with in order to communicate effectively amongst each other.
Startup businesses are no different. Though a product of 20th century digital innovation, the startup space has matured rapidly from a collection of software developers in Silicon Valley to a globally recognized business approach. Over these rapid years of transformation, a set of startup terms has solidified that encapsulates the most important theories and methods involved in launching a successful startup venture today.
Given the dynamic nature of the startup ecosystem, new startup terms are always emerging from disruptive industries like SaaS, fintech, or blockchain. Insightful approaches can be gleaned from the ever-expanding storehouse of terms — as long as you know how to use them accurately.
Wondering how to speak startup?
Whether you are looking to start a new venture or are preparing to meet investors, it is never a bad idea to freshen up on startup terminology.
There are startup finance terms, startup investment terms, startup culture words and phrases, startup consulting services terms, and buzzwords specific to tech and tech-enabled companies. You will find terms from all these categories — and more — in our inaugural list of …
50 Startup Terms to Know
A/B Testing is a web analytics research method for testing two variables on a page to see which performs best for a stated conversion goal. A site owner will compare pages by displaying the two variables (page A and page B) to similar visitors over the same time period. The variant that performs best is then chosen as the permanent page content.
Awareness is the initial step in bringing customers into the sales funnel. Companies can pursue awareness through earned media (PR, blogging, reviews) and paid media (ads and promotional material).
Agile Development is an umbrella term for a service of iterative engineering methodologies used to build products. The approach is designed to be incremental and flexible so that developers and engineers can adapt specs to match customer feedback.
Angel Investors are a small, but increasingly influential, group of wealthy individuals who invest capital in startup companies without any affiliation to a venture capital fund or seed bank. Repayment usually comes in the form of convertible debt.
ARPU, or ‘Average Revenue Per User’, is the projected revenue from each customer, based on subscription services like a membership to an online marketing suite or a cell phone data plan. The ARPU number determines budgetary guidelines for future spending, as it sets the maximum revenue for a quarter or year.
Benchmarking is the practice of measuring the performance of company products and processes against industry leaders or competitors. In early-stage companies, benchmarking is only valuable once a product has been shipped and sufficient sales data exists to measure and compare.
Business Model is the outline of a company, describing how it creates and retains value. A lean startup business model will usually list key partners, outline crucial activities, and set the marketable value proposition, sales channels, revenue streams, and cost structure at the core of the business.
Business Plan is a concise statement of company goals for a new product or service offering. It could be to bring a new product into an existing market, an existing product into a new market, or launch a new business entirely.
Bootstrapping refers to entrepreneurs financing a startup venture out of pocket, or from operational revenue, without a contribution from venture capital. No external funding means the founder has full decision-making power, but it also poses a considerable financial risk given that the company may never receive the investment capital it needs to scale up.
Customer Acquisition Costs, or CAC, is the cost of acquiring a customer. It is calculated by combining total sales and marketing expenses — including salaries — over a specific period and dividing it by the number of customers acquired in the given period. If the cost of acquiring a customer is greater than the lifetime value of the customer, then a company is operating with imbalanced and unsustainable margins. In a sustainable business model, the CAC is always lower than the lifetime value.
Cross-sell is when a salesperson encourages a customer to buy a complimentary item at a discounted rate. This increases the order size and also drives profits in product categories that may otherwise be lagging.
Customer Archetypes means forming a full picture of a companies target audience, segmented into descriptive profiles of a typical group of similar individuals. Hard customer data (like demographics, psychographics, past purchasing history) and soft data (interviews, questionnaires, reviews, feedback) are both taken into account in the creation of archetypal target groups, which then use to guide product and customer development strategy.
Customer Development is a methodology for building startups that involves pursuing, testing, and revising stated hypotheses about the purpose of the business through consistent interaction with potential customers. Only by testing out ideas and asking questions in the field can a company be sure to build a product that meets customer needs. In terms of operational strategy, it means putting the customer first and the rest (product, revenue streams, talent acquisition) second.
Customer Segment refers to a single subset of the target audience, defined by particular traits that differentiate them from other subsets. Each segment requires a unique value proposition catered to their relationship with the company/product.
Customer Relationships is a set of marketing strategies a company uses to bring customers into the sales funnel and retain them, ideally increasing revenue over time through referrals and recurring purchases.
Churn refers to the percentage at which customers cancel a service over time. It is most often measured in monthly increments. For instance, if you have 100 customers, and 10 leave in a month, you end up with a churn rate of 10%.
Demand Creation is the initial step involved in generating a strong pool of leads and, ultimately, sales. Creating demand around a new product often entails crafting a strong lead magnet that A) accurately describes the product to a new audience B) informs them as to how/why it is effective, and C) offers some kind of limited time offer, or in the case of a software company, a free trial period. Aside from a lead magnet, companies use paid and earned media to stimulate demand.
Earned Media describes any exposure a company gets without paying directly for it. In some cases it is totally free, as with product reviews and positive customer feedback on social channels. In other cases, earned media is the result of devoted content marketing campaigns designed around blogging, PR, search engine optimization, and journalist mentions in the news or magazines.
Equity is any form of security representing ownership in a company. In startups, ownership is often allocated in the form of stocks, meaning either issued shares, unissued shares, vested shares (only coming into effect after a specified time period, and often accruing over time) or optional shares (for employees or investors to purchase a percentage of the company.
Go-to-market Strategy can be understood as the overall plan a company seeks to execute in delivering their value proposition to customers. A comprehensive strategy for an early stage company details all the steps involved in the transaction, activating internal and external resources to ensure a competitive advantage is achieved and maintained.
Heat Maps are graphical maps that represent data as color. Heat maps can be used for any type of data visualization — whether it is tracking crime rates on real estate site or measuring sales across a geographical region — and are particularly effective for interpreting trends from huge data sets. In web analytics, heat mapping tracks where visitors navigate most on a page, providing actionable data into how to design a website for optimal user experience (UX) and conversion rates.
High-Fidelity MVP is an early version of a minimum viable product. It may have some features added to the core solutions of the product, but in general, it refers to a rough early version of a product that is used for customer feedback.
Lean Startup is a term popularized by Eric Reis that describes a company built around the Customer Methodology and the principles of Agile Development.
Lean User Interface is a web design approach based on the principles of Agile Development which takes the position that the best customer experience is one with fewest distractions and seamless navigation from one value point to the next. This approach to web development is defined by making incremental improvements to user experience based on thorough research and testing, removing the signal from the noise until only the necessary web design elements remain.
Low-Fidelity MVP can be thought of as the most rudimentary iteration of the minimum viable product. For a lot of companies, it takes the form of a simple website with a sign-up sheet. An earlier version of the High Fidelity MVP, it is also used only as a feedback tool in communication with a target audience to explore pain points and needs.
Landing Page is a page on a website that new visitors land on when visiting your site. It could be any page on a company site, as long as there are links pointing to the page from other sources on the web. Businesses will often design a specific page as a landing page, optimizing the content with a lead magnet to spur interest.
LTV, or ‘lifetime value’, is an estimation of the total revenue potential a customer can bring over the duration of the customer's relationship with the company.
Loyalty Programs are any reward programs used to retain high volume customers and avoid churn. A common example of a loyalty program is the “frequent flyer miles” point system popularized by airlines.
MRD, or ‘Market Requirements Doc’, is a vital component in the product development stage for a startup, both for the marketing and engineering teams. An MRD lists the wants and needs of the customer, based on extensive outreach and testing, which must be accounted for in the product design and marketing of the product when launched.
MVP, or ‘minimum viable product’, is the first iteration of a product that describes/shows how the product offering solves key customer pain points. It could be a PowerPoint, a short video, or a software program that demonstrates the products unique solution.
Methodology describes a system-wide application of methods applied strategically in specific areas. At Morgan Hill, our Path to Value Methodology is an example of a system-wide application of methods designed to account for all functional areas of an early stage company as it matures.
Organizational alignment can be thought of as the relative degree to which all disciplines of a company are aligned at the same stage of growth. A fully aligned company can move forward at a sustainable pace, while a poorly aligned company will have problems dealing with gaps in key functional areas. Misalignment is a recurring issue for early-stage companies, which is why organizational alignment must be made a priority from day one.
Paid Media is any media that has been bought by the company. Advertisement exposure can be purchased on billboards, TV, the web, or in print.
Physical Channel is a cohesive roadmap that includes physical entities (like salespeople or distribution warehouses), involved in the sale of goods to customers or to a market. For example, a wholesale food distributor has a physical channel connecting their products to the grocery store (their customer), where the goods are delivered. The channel includes warehouses, sales reps, and truck delivery distribution networks.
Physical Product refers to any material entity (merchandise, apparel, natural foods) that is sold and shipped to customers through a physical supply chain.
Pivot describes a decisive shift in the business model of a company. Substantive shifts are usually the result of feedback collected in customer outreach efforts and could mean, for example, changing a target demographic from ‘men aged 30–44’ to ‘men aged 18–45’.
Pricing includes any tactics applied by a startup to set the cost of their product offering. Price is always dependant on production expenses and must fit within a sustainable revenue model.
Product Management Model is a process made popular in the manufacturing industry that was adopted by the business community in the early 20th century. It emphasized product development over customer needs and, though well designed for an existing companies product development process, is woefully ineffective for the needs of a startup. The key difference between an existing company and a startup is that an existing company is operating with a set of knowns. They already have a clear understanding of market forces, have a built-in audience base, and are attuned to their competitors market strategy. Startups, on the other hand, are operating from a set of unknowns (i.e hypotheses) that need to be tested and refined before any substantive conclusions can be drawn about market conditions or consumer preferences. This is the primary reason why the product management model has been jettisoned in favor of a customer development model for startups.
Pipeline Management involves generating a set of goals to define a sales pipeline, from initial contact to closing a sale. Goals often include collecting ‘x number leads’ or converting ‘x percentage of leads into customers over x amount of time’. Monitoring these micro-goals helps to evaluate and optimize the structure of the pipeline.
Revenue Model is a key component of the business model that sets out a framework for revenue generation, including valuation and strategy.
Sales Funnel, also referred to as ‘the buyer’s journey’, defines a range of incremental steps a company leads a customer through in the process of making a sale. Each sales funnel will have its own range of steps, but the abiding goal (converting leads into customers) remains the same.
Sales Roadmap is best understood to be the articulation of a plan to reach monthly, quarterly, and/or yearly sales targets, presented in a set of incremental performance metrics to measure success or failure along the way.
Startup is an early stage entrepreneurial venture that is designed around a unique product, service or platform, but that typically lacks a repeatable and scalable business model or market presence required for sustainable growth.
SaaS, or ‘software as a service’, describes a software company that has created a platform for users to solve existing pain points. A popular example of a SaaS company is Salesforce, a cloud-based CRM platform that brings sales and marketing together into a powerful customer tracking software.
Traffic is the total number of visitors to a page, site or store.
Tech-Enabled Company refers to any company that incorporates software components into their internal operations or unique value proposition to customers. It is distinct from a tech company in that it leverages existing technology (like the cloud or algorithmic data analysis) to bolster the human value of their company. There is definitely a fuzzy demarcation line between what constitutes a tech company versus a tech-enabled company. A general rule of thumb is that tech companies design and sell innovative products defined by their technical specifics (an iPhone, a computer processing chip), while a tech-enabled company leverages technological innovation to bolster a real-world transaction. Apple is a technology company because it sells innovative products that offer more functionality than a single service. Uber, on the other hand, is a tech-enabled company because it uses an algorithm connected to a database to create a real-world transaction.
Up-sell is a sales tactic whereby a more expensive, upgraded version of a product is presented to the buyer, who is surprised by the opportunity and makes the purchase.
Value Proposition is a marketing and product engineering term for defining the features of a product that will appeal to a target audience.
Web channels are digital sales channels curated by a company for desktop, laptop, and mobile devices. The channels may take the form of a website, a cloud program, or a phone app.
What do you think of this glossary? Are there terms you think absolutely must make it into your next edition? Let me know in the comment section!