Aspire Start-up Terms Glossary

By
Writers@Aspire
Published
January 25, 2022

As a new founder, you’ll run into many metrics, business terms and accounting terminology you’ve never heard of. In this glossary, you’ll find the definitions of all common start-up terms. 

A

Accelerator 

An accelerator programme offers resources like seed capital, mentorship, connections, expertise and equipment to early-stage start-up founders and aspiring entrepreneurs in exchange for equity ownership. 

Accounts Payable 

The money a company owes its vendors and suppliers, which are considered short-term liabilities. These include logistics, transportation, licensing and equipment. 

Accounts Receivable 

The balance money due to a business for the provision of goods or services, which will be recorded as an asset on the company’s balance sheet. 

Acquisition 

When a company or investment group purchases an existing company’s shares to acquire that particular company. Apart from its shares, they also take over the company’s assets and operations.

Active Users 

The users who open and engage with a product or service, either on a daily or monthly basis. 

Angel Investor 

A high-net-worth individual who invests in start-ups and early-stage companies using their own capital in exchange for equity ownership or convertible debt. 

Annual Contract Value

The average revenue per customer over one year, excluding one-time fees

Annual Recurring Revenue (ARR) 

The predictable revenue generated by a SaaS or subscription company from all its active subscriptions normalised for a single calendar year. 

Annual Run Rate

A projection of future total revenue based on past, short-term revenue, assuming that current conditions continue.

Assets 

A company’s tangible or intangible resources with economic value, which are responsible for generating cash flow and improving sales for the business. These include cash, property, operational equipment, trademarks, patents and copyrights. 

Audit 

An inspection or examination of a company’s financial statements and accounts to determine the current financial position of the organisation. 

Average Revenue Per User (ARPU)

The average amount of money a start-up can expect to generate from one subscriber, user or customer over a specified period.

B

B2B (Business-to-Business) 

Businesses that offer products and services to other businesses and companies. 

B2C (Business-to-Consumer) 

Businesses that offer products and services to consumers for personal use. 

Balance sheet 

The most important financial document in any business, regardless of size and valuation. The balance sheet records a company’s financial position by showing the assets the business controls, the liabilities that it owes, and the amount of equity that belongs to the relevant equity holders. 

Bank Statement

A printed record showing the summary of financial transactions of a specific individual or business. This tool helps account holders monitor their finances and identify errors. 

Billings

The amount on invoices due for payment according to the terms in a contract. 

Bootstrapping 

When a start-up founder finances their business with personal funds and avoids external fundraising to build a self-sustaining business.

Bookings

The total value of all contracts over one year, including one-time fees. A booking occurs when a customer commits to paying for a service, and it converts into revenue once the service is delivered.

Business Account 

A type of bank account used for a range of business transactions such as tracking business expenses as well as depositing and receiving payments.

Business Entity

A company’s entity type is what dictates the structure of the organisation and how the business is taxed. Five of the main business entities in Singapore include Sole Proprietorship, Partnership, Limited Partnership, Limited Liability Partnership and a Private Company. 

 
Burn Rate 

The rate at which a company is spending its start-up capital before generating any form of positive cash flow or profit.

C

Capital

The financial assets a company needs to initiate business operations and produce goods and services. This could be from deposit accounts or money obtained from loans or investments. 

Cash Flow 

The total amount of money that comes in and out of a company due to various business activities. 

Cash Flow Statement

A statement that shows the movement of cash created by a business’s operations and activities. While an income statement reveals whether or not a business made a profit, a cash flow statement focuses on the amount of cash generated throughout an accounting period.

Churn Rate 

The rate at which users, customers or subscribers stop using a service over a specified period.

Compounded Monthly Growth Rate (CMGR)

The month-over-month growth rate during a specified period, anywhere between 6 to 24 months.

Cottage Business 

A small business that operates on a much smaller scale compared to start-ups. Since they don’t typically require rapid scaling, VCs and angel investors aren’t likely to invest in these so-called lifestyle businesses. 

Creditor 

An individual or institution that extends credit to start-up founders and business owners, which will be repaid in the future. Examples include banks, angel investors and VCs. 

Crowdfunding

A type of fundraising that raises money through the combined efforts of a large pool of people who contribute various amounts of money. 

Crowdsourcing 

The process of outsourcing knowledge, information, goods or services from a large number of people to complete or speed up various tasks. 

Customer Acquisition

When a company gains new customers by convincing them to buy their goods or services. 

Customer Acquisition Cost

The total cost to acquire new users or customers on a per-user or -customer basis.

D

Debt Capital 

Borrowed funds or assets that must be repaid at a later date. These may be long-term or short-term loans such as overdraft protection, credit card debt or bank loans. 

Dilution

When a company issues additional shares that result in a decrease in existing shareholder ownership percentage, dilution occurs. This typically happens when stockholders exercise their right to purchase stock. 

Dividends 

The distribution of profits or surplus that a company shares with its shareholders regularly. 

Down Round 

A term used to describe when a start-up’s valuation has gone down significantly during a previous period or financing round. 

Due Diligence

The process of investigating a start-up’s performance, and the risks and opportunities that come with a particular investment opportunity. 

E

Early Adopters 

These people are the first ones to use a product as soon as it becomes available to the market. For newer businesses who have yet to establish their presence in the market,  early adopters could be social media influencers and personalities that help promote products or services. 

Elevator Pitch 

A brief yet effective synopsis of a business. A good elevator pitch is about as long as the time it takes the elevator to reach the next floor.

Equity 

Commonly known as shareholder equity, this represents the value or amount of shares that are issued by a startup. 

Equity Crowdfunding 

Similar to regular crowdfunding, equity crowdfunding is a common method of raising funds or capital for a business. In return for cash or a small investment, investors will be granted a small amount of equity ownership. 

Exit Strategy 

A founder’s plan to sell their ownership in a company to other investors or another company through methods like liquidation, acquisitions, management buyouts and initial public offerings (IPOs). 

Expenses

The operational costs of conducting business in order to generate revenue.

F

Financial Statements

Unlike bank statements, which the bank typically sends, financial statements are generated and prepared by the company’s management. This provides shareholders with a general overview of the company’s financial health, position and performance. 

Fiscal Year 

Sometimes known as a company’s Financial Year End (FYE), a fiscal year is a one-year period that businesses and government bodies use to prepare financial statements and accounting documents. This crucial period can help founders in the planning of their company’s short and long-term financial goals and determine when their corporate filings and taxes are due. 

Fixed Costs 

Short-term business expenses that remain the same regardless of production levels. Things like rent, insurance, salaries and mortgage payments are considered fixed costs. 

Fundraising

Fundraising helps start-ups finance a variety of business activities through the collection of investment capital. 

G

Gross Merchandise Value (GMV)

The total amount of money made from transactions over a specified period.

Gross Profit/Gross Income

The amount of money a business earns after deducting the costs incurred in making and selling a product or delivering a service.

I

Incubator 

Unlike an accelerator that runs on a short-term program and is most suitable for existing business owners, incubators help aspiring entrepreneurs churn out business ideas from scratch or build on an existing concept.

Investment 

The action or process of putting money into a company or asset, hoping to generate profits.

Investment Memo

A common tool in the venture capital industry used to effectively communicate the key elements and fundraising narrative of a company to potential investors. 

Income Statement 

A financial document that shows the income and expenditures of a company, also known as a Profit & Loss (P&L) statement. 

Intellectual Property (IP) 

A category of property that covers intangible creations such as copyrights, patents and trademarks. As a business owner, protecting IP is essential to protect core business concepts and R&D activities from other brands looking to produce a similar product or service. 

Invoice

A payment request that documents the transaction between a buyer and seller; critical for internal audits and controls. Most common for suppliers, vendors, freelancers and contractors. 

K

KPI (Key Performance Indicator)

A measurable value that indicates how effectively a business is achieving a pre-defined objective. 

L

Launch 

Bringing a new business, product or service to the market and making it generally available to the public.

Lead

A potential customer for your business who has given you some sort of contact information. 

Lead Investor 

The individual who is responsible for negotiating the investment terms between start-ups and investors. 

Lean start-up 

A lean start-up is an approach that builds companies and launches products more quickly. Since speed is the most important factor, lean start-ups only release a minimum set of features in their initial stages to receive feedback from early adopters. Based on the feedback received, founders decide if they want to continue building the product, tweak it or pivot.

Liabilities 

Everything a business owes, including loans, taxes, credit card balance, mortgages, accounts payable and accrued expenses. 

Lifetime Value (LTV)

Customer Lifetime Value predicts the net profit a business can earn from a customer before they stop buying.

Limited Partnership

A type of partnership that exists when at least one of the business partners in a company assumes limited liability in relation to their investment and an inability to participate in the management of the business. 

Limited Liability Partnership 

A formal partnership in which each of the business partners is protected from personal liability. 

Liquidity 

The ease or ability to convert a company’s assets into cash at market price. 

M

Margin or Profit Margin

The percentage of total revenue that remains after deducting all costs, taxes and other administrative expenses.

Market Penetration 

Market penetration is the percentage of the products or services sold compared to the total estimated market for that product or service. Often, investors would want to know the market penetration rate of the business to understand how the business is growing and how a brand fairs compared to those in the market. 

Marketing Qualified Lead (MQL)

A prospect that is more qualified to buy than the average lead and can be referred to the sales team. 

Merger

A mutual agreement between two separate companies or organisations to become a joint entity. Not to be confused with an acquisition.  

Mid-Market Rate

The middle rate between the sell and ask price for a currency. This is typically the fairest rate for currency exchange. 

Minimum Viable Product (MVP)

An early version of a product that is just good enough to be tested by initial users and will be optimised based on their feedback. 

Monthly Recurring Revenue (MRR) 

The predictable revenue stream or income that a business expects to receive every month. Do note that MRR is only a measure of revenue and not profitability. 

N

Net Promoter Score (NPS) 

A key metric used in customer experience programmes to measure business growth through the loyalty of a customer to a company. It typically consists of one survey question asking customers how likely they are to recommend the product/service to friends.

P

Partnership

A company that is owned by at least two partners where the partner can be an individual, a company or even a limited liability partnership.

Partner Meeting

A VC meeting or partner meeting is called to discuss business analysis, due diligence and risk assessment before deciding whether or not to move forward with a VC investment.

Payroll

All documentation about paying employees, such as their pay rate, direct deposit authorisation forms and tax deductions.

Pitch Deck 

A presentation that gives clients and potential investors a quick overview of a business. Common elements of a pitch deck include the nature of the business, business plan, target market and opportunity, revenue model and financials. 

Pivot 

Changing or redirecting a business strategy when current products or services have failed to meet the needs of the existing market. Pivoting is not the same as closing down a business, but merely exploring different options and opportunities to keep the business going. 

Private Company

A business entity held under private ownership. As one of the most flexible and scalable business entities on the list, incorporating as a private company is a top choice among entrepreneurs in Singapore. 

Product-Market Fit

Product-market fit means target customers are actively buying and using a product. They’re also telling other people how great the product is at solving their problems.

Profit and Loss Statement

A financial document used to summarise a company’s financial positions and overall performance by assessing the revenues, expenses and costs. 

Proof of Payment

Especially for e-commerce businesses or companies that regularly deal with product shipments from overseas, transaction proof is an essential document in the accounting process. In a dispute between the seller and buyer, this is written proof that the related purchase has been paid for. 

R

Retained Earnings

An accumulated portion of a company’s profits or net income left after a business has paid out dividends to its shareholders at the end of a reporting period.

Return-on-Investment (ROI) 

The ROI is an essential performance measure used to determine the profitability of an investment. When an investor puts money into a business, they want to know their ROI and how long it will take to get it.

Revenue

Revenue is the income generated through business operations over a specified period. It appears first on a company's income statement and is a critical figure to track in any business.

S

Sales Qualified Lead (SQL)

Someone who has shown great interest in your product or service. Both the marketing and sales teams believe they are ready to buy. 

Scalability 

Scalability describes the ability of a business to grow rapidly over a short period. 

Seed Funding 

Angel investors or VCs who specialise in seed funding provide seed capital to founders to help them kickstart their business, develop their product or fund research. To account for the increased risk that is associated with investing in early-stage start-ups, investors are usually given a much higher equity stake in return. 

Sell-Through Rate

Sell-Through Rate measures how much of the inventory was sold over a specified period and, as a result, how fast the investment in inventory converts to revenue.

Series A 

After gaining some traction during the seed or angel round, start-ups move on to the Series A financing round. Usually involves VCs and millions of dollars. 

Series B

The second round of significant funding in the start-up industry. After receiving Series A funding and meeting certain business milestones, startups are ready to enter the Series B financing stage. This stage typically involves a higher share price compared to the price in Series A. 

Series C

Usually the biggest and last funding round for start-ups. In some cases, however, businesses apply for Series D and beyond but this is usually a bad sign. 

Shareholders

Also referred to as stockholders, these are people, organisations or companies who own stocks in a particular company. 

Shareholder’s Agreement 

A mutual agreement that stipulates all the rights, obligations and ownership percentages between all the shareholders of a company. 

Stakeholders 

An individual, group or organisation that has an interest in a company or will be affected by the business of this particular company. Unlike shareholders, stakeholders are interested in the performance of a company for reasons other than stock appreciation or performance. These could be anyone from customers, employees and suppliers to investors. 

Software-as-a-Service (SaaS) 

SaaS is a software subscription model that distributes cloud-based applications using the Internet. Instead of purchasing, installing and maintaining software, SaaS services can be accessed and hosted via the Internet. This eliminates the need for complex operational management tasks and gives founders more time to scale a business at a lower cost. 

Start-up 

Term used to describe new companies in the initial stages of business. Typically characterised by limited revenue and income, and high costs. Most start-ups start by self-financing their business by bootstrapping before considering seed funding. 

Start-up Costs

All expenses incurred during the entire process of business planning, research and development, and the actual business launch. This includes everything from marketing and promotion, market research, employee training, utilities, equipment and permits.

T

Takeover

Often confused with an acquisition, a hostile takeover is when a company purchases and takes over a company, usually against the wishes of the target company’s management and board of directors.

Turnover 

The total amount of sales a business makes during a given time period. Sometimes referred to as ‘gross revenue’ or ‘income’. Unlike profit that measures the earnings of a company, turnover calculates the company’s total revenues. 

Target Market 

A target market is a group of potential customers that might be interested in a company’s product or service. 

Term Sheet 

A term sheet summarises the terms and conditions of an investment deal. It’s a non-binding document but serves as a basis for more detailed, legally binding records (also known as the stock purchase agreement). 

Traction 

When a start-up begins to gain traction, it means that the business is gaining momentum and building a steady demand for its product or service. As initial growth and progress start to become clearer, this is considered to be one of the most exciting times for founders. 

U

Unicorn 

The endgame for most start-ups in the seed funding process. Once a start-up’s valuation reaches $1 billion, they are considered unicorn start-ups due to their rarity. 

V

Valuation 

Valuation is used to describe the current worth of a business. This can be categorised into two types: pre-money valuation and post-money valuation. Pre-money valuation is the value of a start-up before any external funding from investors, VCs and other sources. Post-money valuation includes those investments and adds them to the total amount. 

Value Proposition 

More commonly referred to as a Unique Selling Point (USP), a company’s value proposition is what sets them apart from other companies and the redeeming quality that makes its business attractive to both customers and investors. 

Venture Capital (VC) 

VCs are private equity firms that invest in start-ups with high growth potential in exchange for equity ownership. 

Viral Coefficient

Viral Coefficient, or Virality, is the number of new users each existing customer generates. 

W

Warm Introduction

A warm introduction is when the founder has an existing relationship with an investor or when someone with a current relationship makes an introduction.

Working Capital 

The initial amount of money business owners have to spend or invest in growing their business. These funds are typically liquid and accessible at any time and don't include assets or liabilities. 

Z

Zombie Funds 

Formally known as closed funds, these are private equity funds that no longer accept new business or issue new policies. 

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