If you are trying to secure business funding from one or more venture capitalists, it is important to speak their language. VCs may use a variety of jargon and slang that you will need to understand if you want to capture their attention. Mastering words like the following will help you avoid embarrassment when a VC asks things like ‘what is your burn rate?’ or ‘what’s the valuation of your company?’
Bootstrapping means using one’s personal resources or the small business’ own revenue to fund the firm.
The burn rate is how quickly a company is using up its available cash. The monthly burn rate is simply how much money was spent in a given month.
A business model is a plan for success. This includes determining the right market, the right product or service and the right staffing and leadership system.
Common stock is a form of ownership in a company and is at the bottom of the stock hierarchy. Common stockholders receive dividends on a variable basis, and sometimes no dividends if the company is struggling.
Preferred stock is a form of equity. VCs who hold this type will get paid before those with common stock if a company is liquidated and it also pays dividends at a consistent, pre-determined rate.
Proof of concept
This is evidence that a startup’s product or service idea is feasible, a very important part of every VC’s investment decision.
Return on Investment (ROI)
ROI is the return or increase earned on a specific amount of money invested in a venture. VCs want to know what they can expect to gain for their invested money.
This is the cash needed to initially fund a startup. This is what is required to get a small business from concept to product.
Valuation is the financial value or worth of a company as determined by things like capital, real or potential revenue and structure and quality of the management team.