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An accelerator supports startups for a limited period of time in the early stages of business development, for example through coaching, mentoring, financial assistance and the provision of the necessary network. Such experts include, for example, investors, business partners, industry experts and business angels.
Benchmarking is a way of analyzing the competition and measures the performance of a company's products, services or processes and compares them against each other or with other companies. This process intends to work out improvement possibilities for the own company and to analyze the strengths of competitors.
Form of financing in which no external capital is raised from investors. The company is financed solely from the cash flow it generates itself. The advantage of bootstrapping is that the founding team is not diluted, i.e. does not have to give up any shares and thus retains entrepreneurial freedom. On the other hand, bootstrapping demands discipline from the founding team in managing expenses and can slow down growth.
Bootstrapping Plus is a hybrid form of startup financing. In comparison to the classic VC funding cycle of 3-5 financing rounds, bootstrapping plus is used by founders in niche markets deemed to small for classic VCs. In this financing strategy, founders bootstrapp their startup as far as possible and complete only 1-2 financing rounds with suitable investors. This results in less dilution for founders and smaller, but nonetheless attractive exit opportunities. This type of financing strategy is particularly useful for E-Commerce businesses.
The point in time at which a company reaches the profitability threshold and generates profits for the first time.
A business angel is a private investor who supports startups with capital, know-how and network. Usually, a business angel is an experienced (startup) entrepreneur or top manager himself and participates rather early (e.g. pre-seed or seed round). Business angels hope for a positive development of the value of their shares, which they can sell at a later point in time. Such a point in time can be, for example, a complete exit of the founding team, or a "Secondary" in the context of a larger financing round with new investors. Some business angels organize themselves into business angel clubs in order to conclude joint deals.
Written business concept explaining the business idea, the business model and its implementation as well as the background of the founding team. Nowadays, lengthy business plans have lost value and focus is shifted on tangible traction.
The "Capitalization Table" records who owns how many shares in a company. Employee stock ownership programs, company nesting and liquidation preferences must be taken into account, as well as the distribution of shares, which can shift significantly over the course of multiple investment rounds.
The cash burn rate describes the rate at which a startup burns money (loses money). In most cases, the existing cash reserves are divided by the negative cash flow of a given period. The result indicates the duration until no more money is available. The cash burn rate is particularly relevant in fundraising, since fresh investor capital must be collected before the startup is bancrupt and investors want to understand how long their newly invested funds will last the company ("runway").
The churn or churn rate indicates how many or which proportion of customers have stopped purchasing from the company, e.g. by cancelling their subscription, in a given month. Naturally, a company always tries to keep churn as low as possible. The opposite of churn is customer retention.
The closing follows usually a few weeks after the signing. It refers to the actual execution of a signed contract, such as an investment agreement or a company sale.
In cohort analysis, customers are divided into groups (cohorts) - usually based on a purchase period - and their behavior (e.g., repeat purchases, order volume, or time intervals between purchases) is analyzed over a longer period of time. This allows key performance indicators such as customer retention, average order value or customer lifetime value to be calculated and monitored over a long period of time.
The contribution margin reflects the profitability of a product or service on different levels. Practically, it can be viewed as the amount available to cover fixed costs after all variable costs have been accounted for.
The conversion rate describes the relationship between the total number of website visitors and the number of visitors who performed a specific action ("conversion event") on the website.
The convertible loan is a popular form of financing among business angels and micro VCs. The startup is provided with capital in the form of a loan, which has equity-like characteristics. In the context of the next financing round or an exit, the convertible loan usually converts into shares of the company. The advantage of convertible loans is the avoidance of notary fees and the speed of financing. Furthermore, the investor and the company do not have to agree on a valuation immediately, but can use "cap", "floor" and "discount" to define a target corridor for the valuation at the time of conversion. There are already some standardized templates (e.g. GESSI) that make it easier for founders to draw up a convertible loan agreement with an investor.
Method of raising capital from a variety of private investors, business angels, friends, family and customers - usually via platforms.
"Customer retention" describes a startup's ability to get first-time customers to continue using and re-purchasing the product with the goal of retaining customers over the long term.
CVC ("Corporate Venture Capital") refers to capital from strategic investors, often established direct or indirect competitors.
A data room is a virtual space in which relevant company information such as essential contracts and financial documents are stored. The goal of such a data room is to bundle the company information so that it can later be shared in a secure and confidential manner with others, such as investors or potential acquirers, while they are performing due diligence.
Deal flow describes the stream of investment opportunities received by investors.
Dilution refers to the reduction of the ownership percentage which can occur for existing shareholders when taking on new investments.
A careful and systematic review of the data of a potential investment, acquisition or merger candidate.
The "Elevator Pitch" is a short presentation of a startup lasting approx. 60-120 seconds. The objective is to convince a potential investor with a short but concise presentation of the equity story in order to have a more detailed discussion about a potential investment.
An exit refers to the founding teams "exit" from their company and the associated sale of their shares in the company. Usually, the exit is realized in the form of a sale to a strategic or financial investor (trade sale) or as an initial public offering (IPO).
Through FBA ("Fulfillment by Amazon"), online retailers can use Amazon's warehouse and shipping network.
The summary of a company's performance by key financial variables that help a company predict its future financial performance as well as forecast the outcomes of different financial decisions in order to make the best possible choice. Important information to be included in the financial model includes financial data on the company's operations, accounting, and corporate financing.
Fundraising refers to a process in which a startup raises new capital from investors to finance its operations and growth.
A strategy in online marketing, which aims to increase the awareness and sales of a company with the least possible financial effort. For this purpose, for example, free or low-cost tools and channels such as social media, SEO or content analysis are used to achieve fast progress.
An incubator accompanies and supports founders in setting up a startup, for example by providing services, products or office space. The knowledge and expertise of an incubator helps young startups increase the odds of success. In programs lasting several months, incubators advise the startups in the fields of product development, marketing and finance.
"Investor fit" is the degree to which the profile of a startup matches the expectations of an investor. Venture capital investors (VCs) pursue different investment approaches; they differ, for example, in terms of target sectors, regionality, timing of financing and investment amount. For the fundraising process, it is advisable to check the "investor fit" before approaching the VC.
In the fundraising process, the term investor pipeline describes all investors who are currently contemplating to invest in a startup or who have not yet been contacted but can still be approached.
"Investor Readiness" describes well-prepared founding teams with a compelling pitch as well as a clear view on market size, financials and KPIs, making them "ready" for taking on investment.
The "IPO" or initial public offering describes the first listing of a company's shares on the stock exchange. The IPO is an essential exit channel for startups with a high company valuation. In addition, startups can raise fresh capital for their growth plans on public capital markets.
Metrics that are of particular importance for a startup. KPIs can be used to quantitatively evaluate whether the startup is meeting its set targets.
An agreement on non-binding negotiations between the founder of a company and, for example, a potential investor or acquirer. The purpose of an LOI is for the contracting parties to confirm that they will conduct exclusive negotiations between each other for a certain period of time and that they will not disclose any business secrets (non-disclosure).
Also abbreviated to "Liq. Pref" or "liquidation preference". Venture capital investors often demand a liquidation preference for their investments. In this way, the investor secures the right to a preferential share of the proceeds in the event of an exit or liquidation. For example, investors can demand to get back their original investment amount in the exit scenario before the founding team participates in the proceeds. In this way, the investor is protected from lower exit valuations.
The liquidity forecast is an important part of a company's financial planning and complements sales and cost planning. It is used to determine precisely where cash will flow at what time so that the company remains solvent.
Life-time value describes how much a startup can earn from a customer over the course of a product's life cycle. LTV helps companies calculate how much they can invest in customer acquisition. LTV is calculated on different levels. LTR refers to life-time revenue, whereas LTV is usually calculated on contribution margin level (CM1, CM2 or CM3).
LTV or CLV (Customer Lifetime Value) / CAC (Customer Acquisition Cost) is a key figure for many startups. It describes the ratio of a customer's revenue over the entire duration of the customer relationship, less the cost of sales and other directly attributable costs, to the cost of customer acquisition. A CLV / CAC ratio of less than 1 means that you pay more for acquiring the customer than is earned with the customer over time. A CLV / CAC ratio of more than 1 implies that more is earned from a customer than is spend on acquisition.
Analysis representing the potential size of the market. The "TAM-SAM-SOM"-Framework has established itself firmly in startup fundraising.
Bringing investors and startups together to connect.
Describes the practice of selling, purchasing and combining businesses. M&A advisors, such as Venture Advisory Partners, facilitate the process for all parties involved.
An NDA, or non-disclosure agreement, between two parties contractually fixes not to disclose any written or oral information exchanged regarding a specific project. The parties agree to keep all shared information strictly confidential, even after the project has ended. Potential investors such as VCs usually do not sign confidentiality agreements, as they would restrict the investor's operational activities too much.
Presentation with the most important information about a startup in the context of a financing round. The goal is to convince potential investors to make an investment. The pitch deck introduces the startup and provides, among other things, information about the product, market & competition, financial key figures, the team and unique selling points. All elements are combined in an appealing and coherent manner in a so-called "equity story".
A pivot refers to the strategic change of course of a startup's business model with the goal of better adapting to market demand. There are various reasons that can lead to a pivot. These include, for example, customer feedback that suggests the pivot, or a new regulatory market environment.
Post-money valuation is the value of a company after it has gone through a financing round. To give a simple example: If a startup raises €2.0mn from an investor in exchange for 20% of equity, then the startup is worth €10.0mn post-money. To get to the pre-money valuation, the investment amount needs to be deducted from the post-money valuation, leading to a €8.0mn pre-money valuation.
Pre-money valuation describes the valuation of a company before completing a financing round. See "Post-Money Valuation" for reference.
"Q&A" sessions, are an exchange between two parties in which questions are asked and answered in a structured manner. Q&A sessions are a regular part of due diligence in fundraising or M&A processes, where investors / acquirers can ask important questions to the company's management team.
Scalability refers to the ability of a business model or a company to adapt to strong growth or even to enable it in the first place and to become increasingly profitable in the process.
A more advanced startup that is already in the expansion phase.
Signing refers to the signing of an investment agreement or share / asset purchase contract. After all conditions for closing the deal are met, the deal is finalized (see "Closing").
"Syndication" allows multiple investors to jointly provide the financing needed for a business.
Ticket size describes the financial amount invested by an individual investor in the context of a financing round (also referred to as a ticket). In contrast, "round size" refers to the total amount invested in the company in a financing round.
Pace at with which a startup grows. In general, it can be divided into "soft traction" and "hard traction". "Soft traction" represents all non-monetary metrics that indicate strong growth (e.g., development of user numbers). "Hard traction" describes the positive development of key figures with a monetary impact (e.g., revenue or average order value).
Unicorn: A startup with a valuation of more than €1bn before an IPO or exit. Decacorn: A startup with a valuation of more than €10bn.
The unique selling proposition represents characteristics of a product or service, which are crucial for differentiating it from the competition in the market.
Venture capital describes the equity capital that investors provide to startups and growth companies. This typically takes the form of equity and mezzanine financing. Young companies are usually dependent on equity-like forms of financing, in which the investor and the company share risks and rewards.