Starting a new business? Here is a list of start-up terms that every new entrepreneur should know:
1. Angel Investor
Also known as a seed investor, an angel investor is a high net worth individual who invests money in a start-up. This person can be a family or friend of the business owner. in return for the money invested, the investor will then become a shareholder of the company.
2. Business-to-Business (B2B)
A B2B business means that your product or service is being offered to other businesses.
3. Business-to-Consumers (B2C)
A B2C business means that your product or service is being offered directly to consumers.
4. Beta Test
Beta testing is the final testing of a product before it gets released to the market. This allows the company to receive direct feedback from its target customer. It is the same as a soft opening soft or soft launch. In short, it is a trial run. By doing this, a company gets a chance to improve the product or service.
Bootstrapping is building a company from scratch with limited resources using your own personal savings.
6. Burn Rate
Also known as the run rate, it is amount of cash that is being used by the company to finance its operation. In a way, it is the rate of money that the company is losing each month because the company is not yet earning. In short, it is the negative cash flow.
7. Minimum Viable Product (MVP)
The minimum viable product is a version of the product with just the basic features. This version is just enough for the product to be usable to its target customers. Releasing a minimum viable product is cost-effective. It also shortens the product development phase. In addition, the business can start receiving feedbacks from the customers that they can use to further improve the product.
A pivot is a shift of business strategy when the initial product or service failed.
9. Return-on-Investment (ROI)
The return on investment is the measure of whether a business is profitable or not in a given fiscal year. To calculate the ROI, simply divide the net profit with the total investment made then multiply by 100. Generally, an average return of 5-12% is good.
Venture capital are private firms that offer financing to start-up companies. These firms can be pension funds, financial institutions, investment banks or even universities. They see potential long-term growth in the start-up. These firms will buy a stake in the company for a certain period of time and then exit once they are already profitable.