Terms Defined

The greatest technology investors’ advice for entrepreneurs

BIG PICTURE - MACRO VIEW

BIG PICTURE - MACRO VIEW refers to the overview of the business including its fundamentals and the economic environment in which it operates.  Business fundamentals refer to “the qualitative and quantitative information that contributes to the economic well-being []” and thus financial health and valuation of a company.  http://www.investopedia.com/terms/f/fundamentals.asp ; Definition of 'Fundamentals'

 

BOOTSTRAPPING

Bootstrapping refers to starting a business without external capital.

 

BURN RATE

Burn rate is a measure of how quickly a company consumes its cash or the speed at which cash is declining, i.e., the amount of cash that’s gone "out the door", expressed on a monthly basis. 

Fully-burdened refers to including all costs in the burn rate (or any other) calculation.

 

BUSINESS BUILDING STAGES

Fred Wilson Union Square Ventures defines 3 successive building stages for a startup as product, usage and business.

 

BUSINESS MODEL

Business Model refers to the strategy of how a company will create and deliver value, typically defined as generating revenue and eventually profitability.  Business model examples include advertising, freemium (i.e., offering basic Web products or services for free while charging a premium for advanced features) and subscription (i.e., charging users a subscription price for access to a product or service).

 

DILUTION

"A reduction in the ownership percentage of a share of stock caused by the issuance of new stock." 

http://www.investopedia.com/terms/d/dilution.asp

 

EXIT / EXITING

An exit refers to the manner in which an investor recoups capital invested in a company via proceeds from an IPO (initial public offering),  or more typically a trade sale (sale of a company), often called a liquidity event. 

See  Wikipedia Exit Strategy In Business.   http://en.wikipedia.org/wiki/Exit_strategy

See Wikipedia trade sale http://en.wikipedia.org/wiki/Trade_sale

 

FUNDAMENTALS

Fundamentals, i.e., business fundamentals refer to “the qualitative and quantitative information that contributes to the economic well-being []” and thus financial health and valuation of a company.  http://www.investopedia.com/terms/f/fundamentals.asp ; Definition of 'Fundamentals'

 

INTEREST ALIGNMENT

Interest alignment refers to whether or not investors and entrepreneurs whose businesses they finance have the same [aligned] or differing [misaligned] interests, incentives and objectives with respect to the investment.

 

PIVOT

Changing course in some aspect of a business or business model. 

"It’s changing direction or changing your path to get somewhere based on what you’ve learned along the way.”   Reid Hoffman & Ben Casnocha, book The Start-up of You, pg 58, 68, 70-71

 

PRODUCT/MARKET FIT

Product/market fit refers to a company’s product or service attaining a massive uptick in usage and/or revenue from users and/or customers, because the product “found and satisfied its market”.  

 

RUNWAY

“The amount of time until [a] startup goes out of business, assuming [] current income and expenses stay constant.  [Runway is typically] calculated by dividing the current cash position by the current monthly burn rate."   

http://www.startupdefinition.com/runway