Startup Glossary: The Essential Entrepreneur’s Guide to Business Terms.
85 small business definitions you need to know if you’re starting your own business.
As I embarked on the journey of starting my own business, I meticulously planned every aspect of its operation. From understanding my target customers to planning marketing strategies and refining service offerings, I left no stone unturned.
Yet, amidst this detailed planning, I failed to anticipate the sheer weight of responsibility that would fall on my shoulders as a solo entrepreneur.
In an instant, I found myself assuming multiple roles – CEO, Chief Marketing Officer, VP of Sales, Chief Financial Officer, Director of IT, and more. Suddenly, I was responsible for every aspect of my business, from customer acquisition to managing accounts receivable, accounts payable, and writing legal documents. The magnitude of these responsibilities was undeniable, and I'll admit, it was overwhelming initially.
Reflecting on my journey, I realize the importance of having a comprehensive understanding of business terms. This often complex lingo can prove daunting for new business owners just starting out. This realization compelled me to create a comprehensive glossary. A resource aimed at demystifying these confusing terms and empowering you to navigate the challenges of business ownership with confidence and clarity.
I hope this glossary is a valuable resource for you. Together, we can unlock your business's potential and pave the way for success.
A/B Testing
Commonly used by a company's marketing department, A/B testing compares two versions of advertisements, web pages, and other items and programs, to understand which performs better. Also called split testing, A/B testing involves simultaneously presenting both versions—designated as A and B—to similar groups of users and measuring their responses. You can identify which version gets better results by analyzing specific metrics and optimizing their strategies.
Accelerator / Startup Accelerator
An accelerator or startup accelerator is an organization, company, or group of people that provides education, support, and mentorship to startups. Their programs typically offer guidance, coaching, and resources to help small businesses grow and succeed. Some accelerators may also provide workspace and seed capital.
Accounts Payable
Accounts payable is the money a company owes for goods or services purchased on credit but has yet to pay.
Accounts Receivable
Accounts receivable refers to the money owed to a business by its customers and other companies for goods sold or services rendered on credit. Accounts receivable appear as an asset on the company's balance sheet, showing the amounts expected to be received soon.
Accrual
Accrual represents financial transactions that have occurred but have not been settled or paid for.
Acquisition
Acquisition refers to the process in which one company takes control of another company by purchasing its shares or assets. Acquisitions are often pursued to achieve business growth, diversification, synergies, or competitive advantages in the market.
Aqui-hiring
Acqui-hiring is a strategic business practice where a company is acquired primarily to absorb its employees rather than its products or services. This approach enables the acquiring company to quickly onboard a skilled and experienced workforce. Acqui-hiring saves time, money, and resources by not having to recruit, onboard, or train new employees.
Angel Investor
An angel investor is an individual or entrepreneur who provides financial backing to a startup or early-stage business. The angel investor invests their money in exchange for ownership shares in the company or convertible debt.
Asset
An asset is any resource or property owned by a business and has value. They include tangible assets like equipment and inventory and intangible assets like intellectual property.
B2B / Business-to-Business
B2B is shorthand for business-to-business. It describes the interactions or sales between two businesses rather than between a business and an individual consumer. B2B sales from one business to another often involve large volumes of products, specialized goods, and unique sales terms. These products are often purchased for resale to other businesses or personal consumers.
B2C / Business-to-Consumer
B2C is shorthand for business-to-consumer. It refers to the interaction and sales between a business and an individual consumer. The products are purchased for personal consumption rather than resale. B2C transactions most commonly occur through retail stores, online, or direct to consumers.
B2G / Business-to-Government
B2G is shorthand for business-to-government. It refers to the interaction and sales between businesses and government entities like federal, state, and local agencies and institutions. Products and services sold to the government are wide-ranging, including technology, construction materials, healthcare services, consulting expertise, and more.
Balance Sheet
A balance sheet is a financial statement reviewing a business's financial position at a specific time. It also calculates the company's equity, representing the difference between its assets and liabilities, which reflects its net worth or owner's stake in the business.
Bankable Company
A bankable company is a business that has the necessary criteria, like collateral, a proven track record, or sufficient cash flow, to qualify for traditional bank financing. This company demonstrates stability, reliability, and creditworthiness, making it eligible to secure loans, lines of credit, or other financial services from conventional banks.
Board Of Directors
The board of directors is a governing body composed of individuals elected by the shareholders of the company to supervise and guide its activities. Board members typically include investors, mentors, and industry experts who have diverse expertise and areas of knowledge. They are responsible for making strategic decisions, providing oversight, and ensuring that the company operates in the best interest of its shareholders. The board's leader is the chairman or chairperson, who presides over meetings and acts as a liaison between the board and company management.
Bootstrap / Bootstrapping
Bootstrap or bootstrapping is the process by which an entrepreneur develops their startup with minimal external funding, often relying on their own resources, personal savings, and contributions from friends and family. During the bootstrap stage, founders use whatever resources are available to bring their business idea to life and make it functional. This can include leveraging existing skills and networks and maximizing efficiency to achieve profitability without relying heavily on external capital. A startup that follows this approach is referred to as a bootstrapped startup, emphasizing the self-sufficiency and resourcefulness of its founder(s).
Bridge Loan
A bridge loan is a short-term loan, typically lasting from two weeks to three years, and bridges the gap between your current financial situation and future funding milestones. It provides a temporary source of capital to help the business manage cash flow and continue operations while awaiting more substantial financing opportunities.
Burn Rate
Burn rate is the rate at which a company spends its cash resources over a specific timeframe. It is a critical metric for determining a business's financial health and sustainability. The burn rate is usually expressed per month.
Business Loan
A business loan is structured to meet the unique requirements of a business, offering flexible repayment terms. A company can utilize this loan to support growth initiatives, manage cash flow fluctuations, or address other financial challenges.
Buyer Persona
A buyer persona is a detailed profile of the key characteristics, behaviors, preferences, and needs of a specific customer group. It goes beyond basic demographic information to provide insights into potential customers' motivations, challenges, and purchasing habits. By creating buyer personas, a business can better understand its target customers and tailor their marketing strategy, product offering, and messaging to engage and meet the needs of these customers effectively.
Capital
Capital refers to the financial resources, in the form of money and/or assets, accessible to a business. It is the accumulated wealth the company can use to invest in its operations, finance growth initiatives, acquire assets, cover expenses, or meet financial obligations.
Cash Flow
Cash flow is the movement of money into and out of a business over a specific timeframe, typically a month, quarter, or year. It represents the total amount of cash coming into the business from various sources, such as sales revenue, investments, and asset sales, minus the cash going out to cover operating expenses, direct costs, debt repayments, and asset purchases.
Churn
Churn refers to customers who discontinue their relationship with a business by canceling a subscription, not renewing a contract, or no longer purchasing products or services.
Churn Rate
Churn rate is a metric that calculates the percentage of customers who end their relationship with a company over a specific period compared to the total number of customers the company had at the beginning. It indicates the rate customers are leaving or "churning" from the business. A higher churn rate suggests a higher level of customer dissatisfaction and attrition, while a lower churn rate indicates greater customer satisfaction and retention.
Convertible Note
Startups commonly use convertible notes to secure funding from angel investors without establishing the company's valuation upfront. Instead of determining the company's value at the time of investment, the convertible note operates as a loan that can later convert into equity. Typically, when the startup achieves a specific milestone or secures additional funding, the convertible note converts into equity, granting the investor an ownership stake in the company.
Core Competency
Core competency is the unique strengths, skill s, and capabilities that set a business apart from its competitors and form the foundation of its competitive advantage. These defining traits represent areas where the company excels and possesses specialized expertise, allowing it to deliver superior value to customers. Core competencies encompass knowledge, resources, technologies, and processes that enable the business to innovate, differentiate its products or services, and succeed in its market niche.
Cottage Business
Often run by one person or a family, a cottage business is modest in size, has localized operations, and has minimal infrastructure. These businesses commonly operate from a home rather than a dedicated office space. While cottage businesses may serve niche markets or offer specialized products or services, they typically focus on meeting the needs of a small, local customer base rather than pursuing widespread expansion.
CPL / Cost Per Lead
Cost per lead (CPL) is a metric used in marketing to measure the expenses incurred by a company to acquire a single potential customer or lead. It is the amount spent on marketing activities like an advertising campaign divided by the number of leads generated. This metric is essential for evaluating the efficiency and effectiveness of marketing strategies.
CRM / Customer Relationship Management
Customer Relationship Management (CRM) refers to software tools and systems that help businesses effectively manage and streamline customer interactions. These systems enable organizations to centralize and organize customer contact information, purchase history, preferences, and communication interactions in one accessible platform. The goal is to build stronger customer relationships, enhance satisfaction, and improve overall business performance.
Crowdfunding
Crowdfunding is a way to finance a business by collecting small contributions from many individuals, typically through an online platform. This approach allows a business to raise money without relying on traditional banks or investors. The business retains the funds raised, with a small percentage typically paid to the crowdfunding platform as a fee for facilitating the campaign.
Debt Financing
Debt financing is a standard method startups use to raise capital to fund operations, expansion, or other financial needs. Unlike equity financing, which involves selling ownership stakes in the company, debt financing does not give the lender ownership rights. Instead, the borrower must repay the funds based on the loan agreement's terms.
Demographics
Demographics refer to specific characteristics used to describe and categorize a group of people. These characteristics typically include age, gender, income level, education level, marital status, occupation, geographic location, and household size. This information is valuable for targeting marketing efforts and developing products and services.
Depreciation
Depreciation is the gradual decrease in the value of an asset over time, typically due to factors like wear and tear, obsolescence, or aging. By recognizing depreciation, a business can accurately reflect the consumption of the asset's value over time. Ultimately, depreciation helps a business accurately assess the cost of using assets to generate revenue and determine their financial performance.
Early Stage
The early stage of a startup is the business’s initial development and growth phase. During this stage, a startup typically seeks funding from angel investors or may participate in accelerator and incubator programs to support their development. Various aspects of the business, such as the product or service offering, marketing strategy, and organizational structure, still need to be completed during this time.
E-commerce
E-commerce, short for electronic commerce, refers to purchasing and selling goods or services online. Customers can browse products, make purchases, and complete transactions through digital platforms or websites. By leveraging e-commerce, a business can reach a global customer base, reduce operating costs, and deliver a streamlined and convenient shopping experience.
Equity
Equity refers to ownership in a company, represented by stocks or other securities. When a company receives equity funding, it exchanges an ownership stake in the company for capital investment.
Equity Financing
Equity financing is a means of raising capital by issuing ownership shares in exchange for investment. This means that individuals or entities who invest in the company become shareholders and hold ownership stakes proportional to the amount they invest.
Exit / Exit Strategy
An exit, or exit strategy, is the point at which an investor sells their ownership stake in a company or startup, either for a profit or a loss. Investors typically aim to exit with a profit but may also choose to exit if the company is not performing well to mitigate further losses. From a business perspective, an exit strategy is a strategic plan devised by an entrepreneur to generate profit from their ownership stake in the company. This may involve selling their ownership to investors, another business, or through other means like an Initial Public Offering (IPO).
Fixed Asset
Fixed assets are tangible assets that a business owns and uses for its operations over a long period. These assets are not intended for resale in the ordinary course of business and are not readily convertible into cash. Fixed assets include machinery, equipment, vehicles, furniture, buildings, and land.
Fixed Costs
Fixed costs remain constant for a business regardless of production or sales activity level. These costs must be paid regularly, irrespective of whether the business generates revenue. Rent or lease payments, insurance premiums, salaries for permanent staff, and utilities are examples of fixed costs. Even if the business temporarily shuts down or experiences a decrease in sales, fixed costs still need to be paid.
Freemium
Freemium is a business model often used by startups, especially in the technology industry, where customers can choose a basic product or service for free but have the option to pay for premium or advanced features or functionality. Essentially, the core offering is provided at no cost to the user, enticing them to try out the product or service and experience its value. Customers requiring additional functionality or enhanced capabilities can upgrade to a paid subscription or premium version. This sales model enables a business to attract many users with the free offering while generating revenue from customers who require more advanced features or are willing to pay for additional benefits.
Gross Profit
Gross profit is the total revenue or sales a business generates minus the direct costs of producing or delivering its goods or services. These direct costs typically include materials, labor, marketing, and delivery. It demonstrates a company's profitability and financial performance, as it reflects the efficiency of its operations in generating revenue and managing direct costs.
Growth Hacking
Growth hacking is a strategy focused on rapid business growth using innovative, unconventional, and often low-cost methods. It involves experimenting with various tactics and techniques to acquire customers, increase brand awareness, and drive sales or user engagement. Unlike traditional marketing approaches, which may rely on large budgets and long-term campaigns, growth hacking emphasizes agility, creativity, and resourcefulness to achieve rapid and sustainable growth.
Growth Stage
The growth stage follows the early stage in the life of a startup business. During this stage, critical aspects of the startup, such as its product offerings, business strategies, and team structure, begin to solidify and mature. Startups in the growth stage typically demonstrate traction, showing signs of customer acceptance and market demand for their products or services. The growth stage represents a critical juncture where startups transition from experimentation and validation to scaling their business model and pursuing aggressive growth opportunities.
Incubator
An incubator is an organization or program that supports and nurtures early-stage startups and entrepreneurs, helping them develop their business ideas into successful enterprises. While similar to accelerators in providing mentoring and workspace, incubators also foster innovation and idea generation among startups. Unlike accelerators, which often follow a structured curriculum and operate within a fixed timeframe, incubators focus on creating an environment of collaboration and co-creation where startups can explore and refine their concepts at their own pace. Incubators may also offer resources like access to networks, funding opportunities, and specialized expertise to help startups overcome challenges and grow their businesses.
IPO / Initial Public Offering
An Initial Public Offering or IPO is the process through which a company offers its stock to the public for the first time. This is when the business transitions from being privately held to becoming a publicly traded entity. An IPO also allows existing investors to realize significant returns on their original investments by selling their shares to the public.
Intangible Asset
An intangible asset is a valuable non-physical resource a business owns. Intangible assets include patents, intellectual property, copyrights, trademarks, trade secrets, brand recognition, and customer relationships. An intangible asset can contribute to a company's competitive advantage, revenue generation, and overall success.
Inventory Management
Inventory management is the acquisition, arrangement, storage, and utilization of goods or materials within an organization. This process involves effectively controlling the inventory flow maintaining optimal levels, minimizing costs while meeting demand, and maximizing operational efficiency. Inventory management aims to streamline operations, reduce waste, and enhance productivity by employing various strategies and techniques.
Iteration
Iteration is the process of refining a product or service through a series of trials, identification of shortcomings, subsequent improvements, and further testing. The objective of each iteration is to enhance the quality, functionality, or performance of the product or service, aiming to achieve a superior outcome with each successive attempt.
KPI / Key Performance Indicator
A KPI or Key Performance Indicator is a quantifiable metric used to assess the effectiveness of various aspects within an organization, including activities, team members, or the overall performance of the business. These indicators serve as benchmarks for evaluating progress and success, providing insights into areas of improvement, and highlighting achievements. By tracking KPIs, organizations can make informed decisions, set strategic goals, and monitor performance against objectives, ultimately driving efficiency and facilitating continuous improvement.
Late Stage
Late stage refers to the phase in the development of a startup where it transitions beyond the initial developmental stages, achieves stability in all aspects of the business, and begins to generate consistent sales. During this stage, the startup typically has its business model, operations, and market presence well-established.
Launch
To launch refers to the official introduction of a business's products or services to the market. This marks the beginning of commercial operations, where the offerings become available for purchase or use by customers.
Lean Startup
A lean startup is a business approach or methodology focused on accelerating the product development cycle and bringing it swiftly to market. This strategy emphasizes creating a minimal viable product (MVP) to establish market presence and promptly gather user feedback. The core principle involves building, testing, and refining a business product or service cost-effectively and efficiently. By rapidly iterating and adapting based on customer insights, lean startups aim to mitigate risk, optimize resources, and increase the likelihood of success in a competitive environment.
Liability
A liability is any financial obligation or debt a business is legally responsible for paying. This includes expenses like employee wages, utility bills, taxes owed, and repayments on loans or other forms of borrowing. Liabilities represent the claims or obligations external parties have on a business's resources or assets.
Liquidity
Liquidity measures how quickly and easily an asset can be converted to cash without significantly affecting its market value. Highly liquid assets can be sold rapidly with minimal impact on their value, while less liquid assets may take longer or require selling at a discount to attract buyers.
Market Penetration
Market penetration is the extent or proportion of sales a particular product or service achieves in relation to the total potential market. It measures the level of adoption or acceptance of the offering within its target market. Market penetration indicates how successful a product or service is in capturing a share of the overall market demand, providing insight into its competitive position and growth potential.
Market Research
Market research collects and analyzes customer preferences, behaviors, and needs in a particular market or industry. It aims to gain knowledge of consumer trends, preferences, and purchasing habits that inform business decisions, product development, go-to-market strategies, and overall business planning.
Merger
A merger is a process whereby two distinct companies come together to form a new entity. Combining both business’ assets, operations, and resources creates a unified organization. Through a merger, the separate entities cease to exist independently and instead join forces to operate as a single integrated business.
Metrics
A metric is a quantifiable measurement used to evaluate and analyze the performance of the business. It calculates various aspects of business operations, such as sales, profitability, efficiency, and customer satisfaction. By using metrics, companies can gain valuable insights into their operations, identify areas for improvement, and measure success against predefined goals.
Microloan
A microloan is a loan that involves lending a relatively small amount of money for a short duration, often with a low interest rate. These loans are typically extended to startup companies or self-employed individuals who may not have access to traditional financing options. Their modest size and favorable terms make them accessible to borrowers who may not qualify for larger loans from conventional financial institutions.
Monetization
Monetization refers to generating revenue or earning money from a particular activity, asset, or resource. This can involve strategies like selling products or services, charging fees for access or usage, displaying advertisements, or implementing subscription models. Monetization aims to convert something of value into financial returns, enabling an organization to profit from their efforts, content, or assets.
MVP / Minimum Viable Product
A Minimum Viable Product or MVP is the simplest and most cost-effective version of new product developed by a startup. It includes the core features and functionalities that address the target customer's primary needs. The MVP is released to consumers for testing and feedback, allowing the startup to gather valuable insights about customer preferences and market demand. By prioritizing key features and launching the MVP early in the development process, startups can minimize the time and resources spent on product development while maximizing the opportunity to iterate and refine based on real-world usage and feedback.
Net Profit
Net profit refers to the amount that remains after deducting all expenses, costs, and deductions from a total. This net amount reflects the actual earnings.
Niche Market
A niche market is a small segment of a bigger market focusing on a specific product or service. Within this market, consumers have unique preferences, needs, or characteristics that set them apart from the broader consumer base. Businesses targeting niche markets focus on offering tailored products or services to meet specific requirements of these consumers. Due to their narrow focus, niche markets may provide opportunities for businesses to differentiate themselves and establish a competitive advantage.
NDA / Nondisclosure Agreement
A nondisclosure agreement or NDA is a legally binding document to safeguard a business's confidential information. This information may include proprietary code, formulas, strategies, data, or customer information critical to the business's operations or competitive advantage. By signing an NDA, employees, contractors, or partners agree not to discuss or share confidential information they may access during their engagement with the company. In the event of a breach of the NDA, the company reserves the right to take legal action against the responsible party to enforce confidentiality and protect its proprietary secrets.
Pitch Deck
A pitch deck is a concise presentation providing essential business information to potential investors. It's designed to effectively communicate the fundamental aspects of the company, like its value proposition, market opportunity, business model, competitive advantage, and financial projections. A pitch deck aims to persuade investors that the business is worth investing in by highlighting its potential for growth, profitability, and success.
Pivot
A pivot refers to a business's strategic decision to reassess and overhaul its business model, product or service offerings, or target markets. It involves a quick and often dramatic shift in the company's approach to addressing challenges, capitalizing on opportunities, or adapting to changing market conditions. A pivot signifies a fundamental change in direction to improve the company's viability, competitiveness, or alignment with customer needs and market requirements.
Profit and Loss Statement
A profit and loss statement or P&L summarizes a business's revenues and expenses over a set period, typically a month, quarter, or year. This statement reflects the company's financial performance during the reporting period and is essential for evaluating its profitability and operational efficiency. The income statement highlights the company's ability to generate revenue, manage expenses, and generate profits, helping stakeholders make informed decisions about the business's financial health and future prospects.
Profit Margin
Profit margin refers to the percentage of profit generated from a sale after deducting all associated expenses. It provides insight into the profitability of a transaction by indicating the portion of revenue that remains once costs, like production, overhead, and other operating expenses, have been subtracted. The profit margin is a vital indicator of a business's financial health and efficiency.
R&D / Research and Development
Research and Development or R&D refers to creating, refining, or enhancing products, services, or processes through scientific investigation, experimentation, and innovation. It includes activities to gain new knowledge, explore ideas, and improve existing offerings to meet evolving customer needs or address market demands. The primary goal of R&D is to drive innovation, foster technological advancements, and generate value for businesses by introducing new or improved products and services to the market.
ROI / Return on Investment
ROI, or Return on Investment, is used to assess the profitability of an investment relative to its cost. It is calculated by comparing the net income generated from the investment to the initial investment amount. ROI is expressed as a ratio or percentage and is a crucial tool for investors to evaluate potential risks and returns associated with investing in a business or project. A higher ROI indicates a more profitable investment, while a lower ROI suggests lower profitability than the investment cost.
Runway
Runway refers to the estimated length of time that a company can sustain its operations before depleting all available funding or financial resources. It represents the duration over which the business can continue to operate, pay expenses, and pursue its objectives without additional capital infusion. It is calculated by dividing the current cash reserves or available funding by the average monthly expenses or burn rate. A longer runway provides more time for the business to achieve critical milestones, generate revenue, or secure additional funding, thereby increasing its chances of success and sustainability.
Sales Funnel
A sales funnel represents the step-by-step process by which individuals progress from being aware of a product or service to becoming customers. The stages typically include awareness, interest, consideration, intent, evaluation, and purchase. At each stage of the funnel, prospects may drop out or proceed further based on various factors, such as their level of interest, engagement with the brand, and satisfaction with the offerings.
Scalability
Scalability refers to the ability of a business to grow substantially and consistently in response to high market demand and the potential to expand into additional markets. It implies the business has the necessary infrastructure, resources, and flexibility to accommodate increased demand or expansion without significant constraints. Scalable solutions can efficiently handle growth without compromising performance, quality, or customer satisfaction. They are designed to adapt and scale up seamlessly to meet evolving needs and capitalize on opportunities for expansion while maintaining effectiveness and efficiency.
Seed Funding / Seed Round / Seed Stage
Seed funding refers to the initial investment provided to a startup company to help it transition from the concept stage to build a user base, and begin scaling its operations. It represents the very first phase of raising capital. This funding round may involve contributions from family, friends, individual investors, venture capitalists, or even banks. In exchange for the investment, the startup offers equity or ownership stakes to the investors. Seed funding validates the proof of concept of the business idea and provides the necessary resources to kick start operations and pursue growth opportunities.
Shoestring
Shoestring refers to the minimal budget that a business operates on, typically seen in self-funded startups. This requires businesses to keep their development and marketing costs low until they generate significant revenue. Operating on a shoestring budget often requires frugal spending and creative resource allocation to sustain operations and pursue growth opportunities without access to substantial external funding.
SWOT
SWOT analysis is a strategic tool for assessing internal and external business factors. It is an acronym for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses represent factors within the company, such as resources, capabilities, and limitations. Opportunities and threats are external factors, including market conditions, competition, and regulatory changes. By assessing these four elements, a business can uncover areas of competitive advantage, improvement, potential growth, and risks to be addressed.
USP / Unique Selling Proposition
A unique selling proposition or USP is the distinctive feature or characteristic that sets a product, service, or brand apart from its competitors. It represents the unique benefit or advantage the offering provides customers, which they cannot easily find anywhere else.
UX / User Experience
User experience or UX refers to a person's overall experience when interacting with a business and their products or services.
Valuation
Valuation refers to the process of determining the monetary worth of a business. It is distinct from the price of the business, which is the amount agreed upon between the buyer and seller in a transaction. Valuation involves assessing the company's assets, revenue, profitability, growth potential, market position, and industry trends to estimate its overall value.
Value Proposition / Value Prop
A value proposition is the unique combination of features and benefits offered by a business, product, or service that differentiates it from competitors. It represents the promise or value that the offering delivers to its target audience, addressing their needs, solving their problems, or fulfilling their desires distinctly and compellingly. A strong value proposition communicates the key benefits and advantages of the business or offering, highlighting why customers should choose it over alternatives available in the market.
Variable Costs
Variable costs are expenses and costs that fluctuate in proportion to the volume of business activity. This means that as the level of production or sales increases or decreases, variable costs also rise or fall accordingly. Examples include raw materials, production supplies, and direct labor.
Venture Capital
Venture capital refers to funding provided by investors to startups and small businesses that exhibit significant long-term growth potential. In addition to monetary investment, venture capital may include technical or managerial expertise to support the growth and success of the business. In exchange for providing venture capital, an investor typically receives equity or an ownership stake in the business.
Vesting
Vesting refers to the process by which founders, employees, or other stakeholders earn full ownership rights or equity in a business over a predetermined period. During the vesting period, individuals gradually accrue ownership of their shares based on a predetermined schedule. Vesting is typically used to incentivize employees to stay with the company long-term, contributing to its success.
Working Capital
Working capital refers to the financial resources a business requires to support its day-to-day operations and sustain its ongoing activities. It is essential to cover operating expenses like payroll, rent, utilities, and inventory purchases and manage short-term financial obligations. Maintaining adequate working capital is crucial for ensuring smooth business operations, managing cash flow effectively, and supporting growth opportunities.
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