It’s important to understand the lingo of the field not just because it lets you communicate, but … [+]
It’s important to understand the terms people in a given field use not just because they let you communicate with industry insiders, but because these terms represent different abstractions (mental models) that let you analyze the world in a specific way.
The same is true for startups – there are plenty of startup terms commonly in use by founders or investors. So, here is a list of 10 that will get you started communicating and thinking correctly if you are new to the field:
1. Value Proposition (Offering)
Any business is about providing a better or easier solution than the competitors to a customer’s problem. The single largest startup error a founder can make is pouring a lot of time, money, and effort into a product that nobody needs.
Your value proposition (or offering) is your exact solution (at a specific price) to the customer’s problem. Getting it right would determine success or failure.
2. Lean
The lean methodology entails a build-measure-learn loop that allows you to test your ideas as quickly and as cheaply as possible before pouring serious resources into them. It’s important to get feedback from the market as fast as possible and to discard what doesn’t work in order to find what does.
3. Validation
The process of empirically proving your ideas and assumptions. You usually validate your offering by testing it against real customers to see how they react. When you are doing something innovative, validation experiments are the best way to test if you are on the right path or not.
4. Product-Market Fit
This is what you are searching for in your validation experiments. If your offering fits the needs of the market niche you are targeting, then you would see a pull from the market (people would be interested in your offering and you wouldn’t have to push it on them). Finding PMF is the moment in which you exit the validation phase and enter the efficiency and growth phases.
5. Pivot (and Iteration):
To iterate is to make small changes in your offering in your search for product-market fit. After validation experiments, you’d usually have to iterate to improve your fit. If what you are doing doesn’t work at all, then you’d have to pivot entirely and change your offering or target market.
6. MVP (Minimum Viable Product)
A minimum viable product is the key to a lean approach – it is the minimal offering that allows you to test an idea or concept. If the tests are successful – you can develop the product further. If they are not – you lost the minimum possible resources, which gives you the opportunity to iterate or pivot and test again.
7. MVS (Minimum Viable Segment)
MVS is used more rarely than MVP, but it is just as crucial to marketing your offering as an MVP is to building it. A minimum viable segment is a group of customers who have a very similar problem and could be reached through the same channels. This makes them cheap to approach and makes testing your offering easier.
8. Bootstrapping
The act of moving your early-stage startup project forward without outside investors. Most startups bootstrap at least in the early stages, when they don’t have good-enough traction to attract investors.
9. Startup Investor
Startup investors come in different shapes and sizes. There are two main types – institutional investors (venture capital and other types of investment funds), and private investors – business angels. Both types are interested in projects in different development stages. Pre-seed and seed investors are interested in early-stage projects and they provide capital to test and validate products, while later-stage investors provide growth capital to grow a startup after it has found PMF.
10. Disruption
The act of changing the usual way of doing business in a whole market. Ideally, any innovative startup wants to be disruptive.