Entering the startup environment can be overwhelming, to say the least. The experienced like to use terminologies to make them sound experts. Not to worry, we have curated some terms that shall give you a basic understanding of what is what.
Entrepreneur
An entrepreneur is an individual who creates or invests in one or more businesses, bearing most of the risks and enjoying most of the gains. Entrepreneurs are a source of new ideas, goods, services, and business/or procedures.
How is an entrepreneur different from a businessperson?
A businessperson operates or starts a business with existing business ideas. On the other hand, an entrepreneur explores new ideas to initiate and establish a venture. In simpler terms, a businessperson makes their place in an existing market. An entrepreneur aims to establish a new market entirely. This comes at the cost of a higher risk factor. Comparatively, businesspeople enjoy lower risk. The focus and ideology of both can be different as well. Entrepreneurs focus on the customer and the public experience. Businesspeople are only concerned with their profit.
Startup
A startup is a young company aimed to develop a unique product or service in the initial stage of its operations. It provides products unavailable in the market. And making it in use adds to a newer outlook in the market. This goes hand in hand with the ideals of an entrepreneur.
How is a startup different from a business?
Key differences between a startup and a business can be summed up under four key points. These are:
1) Innovation: Startups are motivated to innovate in the market and present a new perspective of products to the consumer. Businesses are geared, towards achieving the highest profit margins, with minimal to no innovation.
2) Funding: Venture capital firms often invest in startups for a share in the startup. This can be tedious as the founders have to first state the growth indications and showcase how the planned investment will foster the startup’s value. In contrast, businesses raise a majority of their capital from banks or different lenders.
3) Risk: Startups face a higher risk factor as the nature of their trade, exploring new markets. Businesses enjoy low risk for building over an existing approach.
4) Growth & Profit: For startups, growth is measured over a while. It takes time to familiarise the consumers with a new product. On the flip side, businesses grow rapidly but can only expand under adequate management. Primarily focusing on revenue, businesses are profitable from day one.
Founders
The founder is a label with some amount of prestige. It carries connotations of creativity and innovation, determination, native intelligence, and a sense of fearlessness. Founders create something from nothing.
-Forbes.com
The founders are the people who establish the company (or startup)-that is, they take on the risk and reward of creating something from nothing. These people take on all the responsibilities. From assembling a capable team, to running the business, the founders have to do everything.
What's Ahead?
Has this helped you understand the basic terminologies coined around? There are more terms that you should understand so as not to feel like an outsider at startup events and among experts.
The following are a few more terms that you should know:
- Investors are individuals or entities(like venture firms) that commit capital with the expectation of receiving financial gains.
- Angel investors commit capital to a startup in the early stages of its lifecycle. These are usually individuals with personal bonds with the founders.
- A convertible Note is worth a percentage of equity ownership in a company. Some business owners use convertible notes to attract angel investors without having to put a valuation on the company. This turns into equity as soon as another investor comes in.
- Going public refers to the company's initial public offering or IPO. This is just another way of raising capital.
- Startup incubators are groups that support chosen entrepreneurs and/or their businesses with mentorship and funding. In exchange, the incubator takes an equity stake in the company.
- Nondisclosure Agreements (NDAs) are legal documents that protect startup secrets by holding employees liable for damages caused by leaking classified information.