The term startup describes a young company with one or several entrepreneurial-minded founders. Startups often seek to develop a unique product or business idea and bring it to market, then validate the business model by scaling up. Startups can be risky ventures and need to prove their value to attract funding. As a place to work, they certainly have a culture and values which are different from the corporate world. In our guide to startups, we’ll give you an introduction down to the most common terms of startup jargon.
Guide: Startup values
Startup culture values
Startups do things differently than big, established corporations. The “move fast and break things.” They disrupt the marketplace. The uber-rich founder wearing flip-flops and a hoodie might be a startup cliché, but just how is startup culture different?
If company culture is a flexible yet agreed upon way of doing things, then core values are the foundations of that culture. Startups tend to develop their culture around these fundamentals:
- Flat hierarchies: Staff is often minimal, meaning there are hardly and managerial positions and the organisational chart is pretty flat. Employees often have direct access to anyone else, regardless of their position, and people tend to don many different hats at once. You get things done without waiting for someone to tell you what to do.
- Innovation and creativity: As a product develops, startups tend to evolve with it. Constant innovation requires creative thinkers and the ability to “think outside the box” can be the most valuable tool or give a competitive advantage.
- Passion and happiness: Startups want to attract people who are passionate about the cause or product and give it everything they got to make the vision become a reality. Yet they know that work-life-balance is important and burn-out is not sustainable, so they seek to create a happy workplace and foster a community spirit among employees.
- Communication: Startups understand that information flows just like a currency and that effective and accurate communication is key to alignment and growth.
- Learning and curiosity: No one is the perfect fit for a job when the job keeps changing all the time. Startups embrace this and create magic from curiosity, encourage employees to improve upon themselves and be continuously learning.
- Transparency: Internal and external transparency is a straightforward way to satisfy both employees and customers. With little or no marketing budget, startups resort to telling it as it is and hide nothing.
- Responsibility: Startup employees with no clear job title often take on more responsibility than in a corporate environment. But the company as a whole often takes on corporate social responsibility and wants to give back.
Startup company values
As newly founded companies, startups have little or no profits to show and hardly any history. Yet investors need to determine the company’s value somehow to consider the probability of success and the amount of money to get there.
- Looking at the market, an investor can determine the startup’s value by the acquisition cost of similar companies, but this approach doesn’t work for new products or business ideas.
- The discounted cash flow subjectively tries to gauge a startup’s future cash flow.
- A startup can also be valued by the cost of duplication, which leaves out intangible assets and future potential and only looks at past expenses for developing product, service and physical assets.
- Another valuation method is to look at how far along the company is in its development: A startup with a minimum viable product has a higher value than one that consists of just an idea and little else.
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Comparison: startup culture vs. corporate culture
What are the differences between startups and other corporations in direct contrast? What can you expect from working in one or the other environment? Find out which workplace suits you better with our nifty cheat sheet!
|Work-life-balance||Startups want you to be passionate about the work and give 100%, but also need you to be happy. Still, the burden of work-life-balance can be on the worker.||Modern corporations have realised that happy employees perform better and contribute actively to work-life-balance.|
|Job security||In a risky venture, you don’t know how stable or secure your job is. Even a more established company will prioritise employees who are adding the most value.||Depending on the industry, sector and demand, a corporate job most likely offers higher job stability and security.|
|Structure||Flat hierarchies and a fluid structure.||Intricate organisational chart with probably a lot of middle management or at least delegation of work.|
|Responsibilities||You might have to take on more responsibility, but with that comes influence and the ability to learn and also leeway to experiment.||Responsibilities are clearly defined, yet you have less influence and tendentially less “wiggle room.”|
|Workload||Despite the valued work-life-balance, work hours can definitely be more in a startup.||Hours are likely fixed with a more even workload distribution; overtime is typically compensated.|
|Personal development||Broad opportunity for learning many different things, not necessarily in-depth.||In a corporate position, your role is clearly defined and you can master it and hone your skill.|
|Name recognition||Chances are few people will have heard of your workplace. A position in a successful startup can boost your career though.||A larger company might be known and respected and look good on your CV.|
|Fixing problems||As a rule of thumb, if you find a problem, you fix it.||If an issue isn’t “owned” by you or your team, it’s someone else’s job to fix it.|
|Benefits||Startups sell you “perks” like snacks, table tennis and no dress code. In terms of compensation, you can often get stock options without guaranteed success of the company and a wait time to become fully vested.||Bigger companies have bigger budgets and offer benefits such as health care, pensions, childcare, discounts and an attractive salary.|
Startup lingo: learn the most important jargon
Do you speak the languages of startups? Creative job titles such as Marketing Guru or Content NInja are common by now, but what’s behind the more in-depth jargon? We’ve got you covered with this overview.
- Accelerator: A program or organisation helping startups grow through advice, mentoring and resources.
- Acqui-hiring: The practise of acquiring a startup for the purpose of hiring its staff, the intellectual capital – often in combination with intellectual property.
- Angel investor: An individual or company providing early funding to a startup, often in exchange for a stake in the company. An angel investment might be smaller than that of a venture capitalist.
- Bootstrapping: A startup pulling itself up by their own bootstraps, meaning self-funding through cash from friends, family and personal resources.
- Burn rate: The total capital divided by the monthly spending amount, i.e. the rate at which a startup is burning money, at least until they can secure more.
- Disruption: The changing of a marketplace through a product or technology, which might begin at an initial loss or at least less profit than competitors.
- Exit strategy: The vision of the founders to get money out of the venture and paying back investors. This could mean selling the company going public, through a merger or acquisition or liquidating the business.
- Incubator: While an accelerator helps existing startups, an incubator facilitates the forming of these companies, again through mentorship and for equity.
- Initial Public Offering (IPO): The moment the shares of a startup are offered for the first time and the private company goes public. It’s another way to raise funding, but is a lengthy process which includes the startup valuation by analysts.
- Lean startup: A nice term of operating on a shoestring budget. A lean startup is trying to validate a business as quickly and cheaply as possible.
- Minimum viable product (MVP): A startup’s most basic version of the product or service that meets the minimum requirements for going to market and is then developed and enhanced in further iterations, implementing initial customer feedback.
- Pitch: A short and often catchy version of a startup’s business plan with key figures to win over potential investors.
- Pivot: A quick change of direction, e.g. when a company targets a completely different market segment. This can be based on user analysis and is often an attempt to reach or improve profitability.
- Scaling up: The phase when a startup tries to replicate initial success at scale by growing in sise or entering new markets.
- Seed funding: The first round of funding, commonly after the angel investment. Seeds can be referred to in stages, i.e. series A, B, C, D, E.
- Term sheet: A basic and typically non-binding document outlining the financing terms between investor and startup. Any binding agreement will be based on the term sheet.
- Unicorn: A company with a valued worth of at least one billion US dollars. Instagram, AirBnb or Shopify are unicorn startup examples.
- Valuation: The process of determining a startup’s worth, either before funding or going public. Pre-money valuation leaves out received funding, post-money takes funding into account.
- Venture capital: Money provided by a professional institution or individual to startups in exchange for equity.
- Vesting: Startups often hire employees for a salary plus stock options. A vesting schedule specifies how long the individual must remain with the company to receive their full share of equity and thus become fully vested.
Want to know more about corporate jargon and terms? Learn important Business English abbreviations!