Angels, unicorns and other magical start-up terms you should know
The start-up environment is by definition new and constantly changing, creating a whole new lexicon of jargon all the time. To help you navigate this sector, we have compiled a list of the key terms you should know.
A newly-founded company often offering a new product or service to the market. A start-up can retain this name for its early years until it becomes established, either through organic growth or by being acquired by a larger company.
Start-ups that have reached a high growth stage are sometimes referred to as scale-ups. Although this term is less popular in mainstream news, you may come across it in specialist technology or business publications.
A programme which aims to grow a start-up within a fixed timeframe. In order to be part of an accelerator programme, start-ups must have already developed an initial version of their product, also known as a minimum viable product (MVP). Accelerators usually provide office space, a network of experts, advisors and funding or opportunities to pitch for investment.
Often used as a synonym for an accelerator, an incubator is a programme for earlier stage start-ups which have an idea or a business plan but not necessarily a product ready to demonstrate or launch. By the end of the programme the start-ups should be ready to pitch their idea or demonstrate their product.
An opportunity to work in a space alongside other entrepreneurs and start-ups. This is useful for start-ups as they have a safe “testing ground” for their ideas. Co-working often comes as part of an accelerator or incubator programme.
A privately held start-up valued at more than $1 billion. Many unicorns are start-ups with financial technology propositions. See ‘Unicorns’: what are they, why are they called that, and why are there so many? for more information.
Initial public offering (IPO)
A privately-held company offers its shares to the public for the first time. IPOs can help to raise money for an acquisition or to expand the company’s shareholder base. However, IPOs also mean giving away some control of the company to new shareholders, adopting corporate governance codes and producing financial statements.
A high net worth (HNW) individual that provides financial backing to a start-up or entrepreneur when the company is being set up. This is usually in exchange for company shares. Angel investors are sometimes part of angel groups that host events to hear start-ups pitch together, but they also invest on an individual basis.
A venture capital firm is a group of investors providing capital to start-ups exhibiting high potential growth in exchange for a stake in the company. They usually invest when the company is looking to commercialise their idea (for example, once the start-up is established).
If the founder of a start-up is not financing the company themselves, they will need to raise money to start the business. This money is called seed funding as it allows the founder to “plant the seed” that enables the company to grow.
Series A - D funding
If seed funding is not sufficient, the start-up progresses through subsequent rounds of funding named series A, B and C.
Companies that reach series D funding do so if they are in need of a final push before an IPO or if they fail to reach the goals set out during series C funding. The latter may indicate that a company is struggling and will devalue the stock price.