The startup world comes with its own unique language packed with
jargon and acronyms. Understanding the vocabulary that drives the
startup ecosystem is like having a map in unknown waters—it shows the
road forward in the face of doubt and ambiguity. While you don’t need to
know every buzzword right away, there are some foundational startup
terms and definitions that every founder should understand. Whether
you’re a seasoned entrepreneur or taking your first steps into the startup
world, these terms would definitely help you while pitching your startup in
front of investors, understanding a pitch deck, or even understanding
various metrics of your startup.

  1. Due diligence: In the context of startup, due diligence refers to
    the audit of the firm conducted by angel and venture capital
    investors before determining whether or not to invest.
    Everyone that has ever watched Shark Tank or any other show where
    a millionaire investor puts in money in businesses might be familiar
    with due diligence. For example, Through-out the show, investors
    are introduced to several firms, along with their financials and
    predicted growth. The entrepreneur’s presentation is polished and
    confident, yet it ends abruptly due to withholding crucial
    information. Investors typically discover a concealed debt, a pending
    lawsuit with a previous partner, some type of ethical concern or
    some plagiarised promises to the potential investors or with the
    goods being provided.
  2. Runway: Runway refers to how many months your business can
    keep operating before it’s out of money. It’s important for
    sustainability and financial planning since it shows how long the
    company can run on its current level of money. It is determined by
    dividing available cash by the monthly burn rate and reflects the
    pace at which the startup spends money.
  1. Net Promoter Score (NPS): A metric called Net Promoter
    Score (NPS) is used to gauge how satisfied and loyal customers are
    with a business or product. “On a scale of 0 to 10, how likely are you
    to recommend our product/service to a friend or colleague?” is the
    basic question that forms the basis of this survey. Three groups of
    respondents are identified: those who score 9–10, those who score
    7-8, and those who score 0-6, or promoters.
    Subtract the percentage of Detractors from the percentage of
    Promoters to get the Net Promoter Score (NPS). If all respondents
    are Detractors, the score can be -100; if all respondents are
    Promoters, the score can be +100. NPS offers insightful data on
    overall customer happiness and loyalty, which helps companies
    assess their performance in comparison to rivals and pinpoint areas
    for development.
  2. Gross merchandise value (GMV): GMV stands for Gross
    Merchandise Value. It refers to the total sales value of merchandise
    sold through a particular platform, marketplace, or e-commerce
    website over a certain period of time. GMV includes the total value
    of all goods or services sold, regardless of whether the platform
    retains a portion of the sales revenue as commission or fees. It is an
    important metric for evaluating the scale and growth of e-commerce
    businesses and online marketplaces. It’s a metric that is most
    commonly used in the E-Commerce industry.
  3. Capitalization table (Cap Table): A cap table (also called
    capitalization table) is a spreadsheet for a startup company or early-stage venture that lists all the company’s securities, such as common
    shares, preferred shares, warrants, who owns them, and the prices
    paid by the investors for these securities. It indicates each investor’s
    percentage of ownership in the company, the value of their
    securities, and dilution over time. For investors, the cap table aids in
    assessing founder motivation, predicting future dilution, evaluating
    talent attraction, and determining investment amounts. For
    founders, it facilitates effective company management, guides
    employee option pool management, and ensures compliance for
    audits and future financing rounds.

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