Glossary of entrepreneurship
If you're thinking about starting your own company, it's important to have a solid understanding of the key terms and concepts commonly used in the world of entrepreneurship. To help you get started, here are 10 essential terms every aspiring founder should know.
Startup
A startup is a new company that is in the early stages of development. Startups focus on creating a new product or service that solves a problem in the marketplace. Most startups also have in common that their solution is based on technology.
Market opportunity
A market opportunity is a gap or unmet need in the market that a startup can address with its product or service. Identifying a market opportunity is a key step in the startup process. Founders often use their own experience in a particular industry, market validation interviews, or metrics such as total available market size to define and quantify the business opportunity.
Value proposition
A value proposition is a clear statement that describes the unique value that a startup's product or service provides to its target customers. It should be concise and compelling and should be immediately clear to your potential customers. For example, Airbnb's value proposition for guests could be summed up as
"Find a place to stay that is affordable, unique and provides a more immersive and authentic travel experience."
Business Model
A business model is the way a company makes money. There are all kinds of established business models: from generating revenue from advertising, sales and monthly subscriptions, to charging customers a percentage for the value provided.
Having at least a solid plan for how your startup will generate revenue is key to raising money from investors. In addition, having a clear idea of a business model or, better yet, a few paying customers, is one of the strongest signs that your product is actually creating value for the market.
Pitch
Pitch is a general term for when a founder talks about his or her startup. The best known forms are investment pitches, which are usually backed by a series of slides, or elevator pitches, which are few-second summaries that can be told during the time you spend in an elevator.
But in reality, a founder is pitching every time they talk about their startup: from meeting an investor for coffee, to explaining what they do to a supplier or customer, to getting a potential new employee excited about the company. The most important thing about a pitch is that the audience can understand what your startup does within the first few seconds.
Accelerators
Accelerators provide resources and support to early-stage startups, usually in the form of training, mentoring, funding and networking opportunities.
Most accelerators ask for a fee or some capital for their services, but not all of them work that way. Tetuan Valley's Startup School program is free for founders: no fees, no capital.
Go To Market
A go-to-market strategy describes how a startup plans to reach its target customers and generate revenue. It includes key elements such as pricing, distribution channels and marketing tactics.
Most startups tend to focus on a specific audience first to gain traction and then expand to other types of target customers once they have completed the first few iterations of their product. For example, a startup that sells sustainable cutlery may start by focusing on selling spoons to ice cream shops and then expand to other types of cutlery and other types of customers.
Product-Market Fit
Product-market fit is the point at which a startup's product or service meets the needs of its target customers and generates strong demand. It is a critical milestone for any startup and is generally perceived when you begin to have a significant proportion of your potential customers coming directly and asking for exactly what your product or service offers.
Scalability
Scalability refers to a startup's ability to grow its business quickly and efficiently. A scalable business model can support rapid growth without a proportional increase in costs or resources, so having ten times as many customers will cost less than ten times as much.
However, scalability issues generally arise a little later in the life of a startup and it is much more important to validate your solution and find your first customers, even if that requires doing things that don't scale.
Investment
Most startups experience explosive growth, which is almost always made possible by obtaining external funding. Funding can take many forms, from asking for some money from people you know, to getting a loan, to the entire venture capital process of closing multiple rounds of investment.
By familiarizing yourself with these key terms and concepts, you will be better equipped to navigate the entrepreneurial world and build a successful startup. Good luck!