And we're back with part 2. VC jargon is the defacto manner in which investors talk all the time. It makes them look and feel cool, however, it's usually the first time founders, or interns, or doe-eyed analysts who may not understand all the terms fully, and get super confused.
Today, we are adding to a list of jargons (in alphabetical order) to help you understand some of the VC slang in plain English!
In case you have a better or simpler explanation or would like to add some to the list, ping me at email@example.com
Adding some that we missed in Part 1
Average revenue per user. If the company has revenue of Rs 1 lac, and 1000 users, the ARPU = Total revenue divided by Total users. In this case, 1,00,000/1,000 = 100
Annualized run rate. If the company has a revenue of Rs 1 lac in a month, the ARR of the company is Rs 1 lac x 12 months = 12 lacs
Allocation is the size of the round that is set aside for an investor or a group of investors who have usually committed verbally (soft commitment)
B2B means Business to Business. This means the model is for a business to sell its goods or services to another business
B2C means Business to Consumer. This means the model is for a business to sell its goods or services to end users or individual customers
Barriers to entry mean obstacles that a company can face while entering a market. This can be created because of the existence of other companies, brands, patents, exclusivity, monopoly, large investments required to get started, etc.
An acquisition offer that is so attractive that the company's management & board must accept it, if it does not want to risk the shareholder's ire
Book runner is the lead investment bank that manages the entire process of equity or debt financing including documentation, introductions, syndication, pricing, allocation & closing
A bootstrapped company is a company that is funded by the entrepreneurs own capital or personal resources or the company's revenues
The Break-even point is the point at which the company starts to show positive operating results. A breakeven point is a point where the company's expenses are totally met from the company's revenues, and the company is neither loss-making nor profitable
A bridge is a short-term financing option that can be either equity or debt, or both, which can be used to fund the company until it can find a more comprehensive long-term financing option
Burn rate is the rate at which a company consumes capital to cover expenses. This is typically expressed on a monthly basis. A company with a high burn can not operate for long without growing revenues, or raising capital.
A business plan is a summary that captures the key attention of the investor. It gives us a synopsis of the business concept, history, industry, market, competition, management, marketing plan, a financial plan for the future.