Explain Startup Jargon to a 5 Year Old - Reading Time: 6 Mins

Introduction

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When it comes to startup jargon, there are tons of jargon. Which might be useful for a developer. Especially if they plan to work and search for a good startup.

They need to understand these jargons and ask the right questions when they are planning to work for one. Besides, just knowing oh... it's early-stage startup or oh.. it's a late-stage or series x startup which should form part of your initial analysis fo the startup if it makes sense to work in one.

Jargons might change based upon your country on how it is defined legally. I would suggest that if it is part of the term sheet during the negotiation phase. Please have it go through a lawyer or tax accountant, who are familiar with working with startups. Ask them about potential pitfalls before proceeding in joining the startup.

Why You Should Know?

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Not knowing hurts you a lot because due to jargon some are predatory that are out there to make you work for "free" or without the right compensation for the work. This exposes you to risks as well. Especially for being unemployed 1 or 2 months after you are hired to work in a job.

So knowing these jargons helps a lot in understanding a startup before you join one. There are literally people who are willing to smooth talk, guilt-trip or employ psychological pressure to make you agree to work for them. To get you onboard to their startup as soon as possible. Without you doing your own due diligence to look out for any skeletons in the closet in the startup before jumping on with them.

What Does Investor Look For?

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All investors (yourself included) have their own yardstick. To measure a startup on why is it valuable to join or invest in a startup. You must use this lens of an investor even your an employee of the startup. I will be highlighting the top 5 that I know that an investor will look out for when they are investing for a startup:

  • Total Addressable Market - The total amount of money that anyone is will to pay you to solve their problem.
  • Founding Team - Your initial team of 10 or less. Your startup is trying to solve. Investors prefer the team to have someone, who has experience working on problems/market that the startup is working on. To get out of unseen problems or tap on their professional network to make it easier to sell. Which an outsider may encounter difficulties to break into it.
  • Business Model - This covers how a startup is paid by its customers directly or indirectly. It can be multiple forms or a combination:

    • Selling eyeballs to advertisers
    • Recurring payments by the customer
    • Taking a small cut for every sale that is conducted through your website.
    • Addon like "would you like to upsize your fries or drink for your meal?
  • Unfair advantage/Unique Selling Proposition - What makes you special to find you or attracted to you to buy products or services. Think of your startup as a purple cow that is surrounded by a bunch of cows.
  • Vision - It is the dream of how you see your startup to become. This has to come from your enthusiasm, confidence & passion. To make it happen in 5 to 10 years with your founding team.

Startup Jargons

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  • Lean Startup - It one of the popular general overview guidebook with steps on how to create a startup. Which a lot of incubators or accelerators will use it to improve the success rate of a startup.
  • Technology Adoption Lifecycle - It talks about how the various stages of product or services are used or purchased by a business. From your mom and pop store to big business like Walmart or Amazon.
  • Product Market Fit - It's the sweet point, where you had founded your paying customers. Through the products or services offered by the startup that is solving their painful problems.
  • Minimal Viable Product (MVP) - Building a small & simple product or service that is seeking to solve one or two painful problems encountered by your customers.
  • Pitch Deck - A presentation slide that talks about your startup used for raising money or resources from people.
  • Founding Team - The first 10 people or less that is involved in starting your startup.
  • Termsheet - Legal document that talks about what is given to you if you work for them.
  • Stock Options - The piece of the pie of the startup that you can buy using your money.

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  • Vesting - Based upon the number of years you are working for a startup. You are given a small piece of the pie that is from the large piece that is given to you by the company for the number of years working for them.
  • Pivot - To switch from one idea to another idea for the startup.
  • Total Addressable Market - The rough estimate for a painful problem that people is willing to pay to have it solved.
  • Burn Rate - Important topic on how long does it last till the lights go out for a startup in terms of weeks or months.
  • Agile - A way of thinking based to move fast and break things based upon Totoya's approach to make cars.
  • Tours of Duty - Working in a job with a purpose or intent for 2 to 4 years.
  • Scaling - From a small amount to a large number of users or customers who use your products or services.

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  • Business Model Canvas - A one page summary of who is the customer that is paying you and ways to solve their painful problems. How your startup is gonna create products or services to solve their problem.
  • Lean Canvas - Much like business model canvas but it focuses on how your startup has to solve the painful problems for your customers in a single piece of paper.
  • Jobs to Be Done - Talks about how the products or services are used by your customer to solve their problem when they encounter a painful problem.
  • Unicorn - It means that the startup is worth 1 billion dollars or more by the investors.
  • Cockroach - It means the startup focus on customers who pays them to solve their painful problem. With a never say die mindset to make it succeed with the limited resources they use.
  • Venture Funding - A group of sophisticated & professional investors who provides you money for startups who are older like 1 or more years or has the potential to make it big.

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  • Angel Investor - A informal investor with the network or personal connections who invest in an early-stage startup.
  • Convertible Notes - A piece of paper that talks about the loans amount in the form of future ownership of the shares that are given to you.
  • Bootstrapping - Focus on reducing cost and does not require external money. Beside customers who are paying for their product or services.
  • Deeptech - A company with a legal document called a "patent" that says that no one can copy or use their ideas. Without paying or forming an agreement with the startup. Usually, the patent will be in cutting edge technology that is not founded in the market.
  • Seed Funding - Intiail money need to get started as a startup
  • Series A - A proven track record that is possible for the startup to grow up to become a bigger startup in future profits that are funded by investors.
  • Series B - Has a found their product-market fit to show that they can grow bigger to allow them to scale up their operations.
  • Series C - Focus on keeping their foothold for a larger amount of customers.

Conclusion

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Always remeber that regardless the startup you are looking for. Pick up your investor hat and think like a investors when you are jumping into one. Do not be sway by pressure by any startup founder or co-founders before you do your own due dilligence of the startup.

I hope you can be useful for you to know about it. To avoid the pitfalls whenever you join a startup. I do not want to see anyone stumble upon finding the right startup and getting cheated by a snake oil salesman who wants you to work for free.

Reference