Silicon Valley has been a “thing” now for more than 40 years, and venture capitalists have developed a colorful vocabulary to refer to their everyday concepts. Like any bubble, theirs is marked by enough insider slang and professional puns to fill an entire dictionary.
Some basic business terms sprinkled into the mix, like “valuation” or “disruption,” are easy enough to deduce. But others are a bit trickier.
We decided to help you catch up. Whether you’re a founder or just someone trying to understand the industry, you might appreciate having a bit more understanding of the lingo. Here’s a guide to some of the lesser-known terms thrown around the $500 billion VC world.
Acqui-hire: When an established company acquires a startup primarily for its workers, which is probably easier than DMing every employee on Linkedin and persuading them to come work for a competitor.
Angel investors: These are insane dreamers who take a leap of faith by providing fledgling startups with their first round of funding in exchange for equity. Though most startups are destined to fail, angel investors aren’t always throwing cash to the wind. If a company does get off the ground and experiences hockey stick growth (see below), the angel investor’s equity balloons in value. When an angel investor isn’t around, some founders turn to older relatives in hopes that they will seed their venture out of their 401(k)s.
Bootstrapping: Startup founders that don’t want to give up equity to VCs (or extort their grandma) resort to bootstrapping their company, using their own funds to get it off the ground.
Cottage business: A business that won’t make anyone a billionaire but allows one to monetize a hobby and make a buck or two selling artisanal products from home. These are much more likely to involve loaves of sourdough than loads of cash.
Dry powder: Back up cash (or other liquid assets) that a VC has tucked away under their mattress and is prepared to use at any moment.
Eating your own dog food: It's really not as gross as it sounds – the expression refers to companies using their own product. Any time Zoom employees hop on a Zoom call they are taking a bite of their own dog food.
Elevator pitch: A brief, concise pitch for a startup idea that lasts for about the length of a metaphorical elevator ride (the worst nightmare of any VC is getting stuck in an elevator with an aspiring entrepreneur).
FAANG: An acronym borrowed from the stock market that refers to five startups that made some angel investors very happy (and fantastically wealthy): Facebook, Apple, Amazon, Netflix, and Google. Investing in a company that gets sold to one of the FAANG gang is akin to winning an olympic gold medal in the VC world.
Example: "I can’t wait to get my NFT data processing company off the ground, sell it to a FAANG company and retire to a bungalow in Bali."
FOMO: It stands for ‘fear of missing out’. FOMO is really a fear of not hopping on the bandwagon of the next big thing and finding yourself left in the dust as fellow VCs reap massive returns and buy up Malibu mansions.
Hockey stick growth: A sudden explosive growth experienced by a startup that follows a period of plateau, represented by a graph in the shape of a hockey stick. VCs are anxious to see company revenues get past the flat “blade years” so they can retire off their equity once revenues reach the handle of the hockey stick.
Intrapreneur: They might work out of a cubicle in a Fortune 500 company but they don’t let that stop them from acting like an entrepreneur. These people take risks and innovate to the delight of their employer, proving wrong the haters who think that large organizations stifle creativity.
MVP: A minimum viable product is the most basic version of a product that is usually developed in the garage of the founder’s parental home, utilizing a minimal amount of resources. It is then sold to tech-forward guinea pig customers who provide feedback (sometimes by venting about why they regret making the purchase).
OPM: An acronym that stands for "other people's money," or the source of funding for non-bootstrapped startups. OPM almost never comes without strings attached, which usually take the form of ownership equity and some level of control over company management.
Spray and Pray: The VC version of buying stocks selected by a blindfolded monkey throwing darts. The strategy involves making small investments in a large number of startups and praying that one of them is a hit.
Sweat equity: Equity offered to early-stage startup employees in exchange for their sweat (blood, toil, and tears) in lieu of a monetary investment. They might not have put down any cash for the seed fund, but they deserve a reward for their sixteen-hour days and not taking a day off for three years.
Sweaty startup: An old school business that provides local services and isn’t developing a fancy app or building a flying electric car. They’re the folks you call when you need someone to clean your apartment or fix your bike. They might not be on the cutting edge of technology but they’re unlikely to result in VCs throwing cash at a bunch of vaporware (see below).
Ticket size: Ticket size matters as it is the dollar amount that a VC has invested into a startup. It determines the amount of equity the VC is entitled to.
USAAGP: The U.S Generally Accepted Accounting Principles are the accounting standards that public companies and VC-backed private ones are required to adhere to. They help ensure that companies don’t cook the books and that accountants don’t get more than two hours of sleep during tax season.
Vaporware: An incredibly promising product that exists only in a startup founder’s imagination. Even after lots of funding and years of promises to release a demo version, nothing more than a blueprint is usually delivered. A prime example is the Theranos device that was supposed to magically scan a drop of blood for hundreds of diseases. Founder Elizabeth Holmes was convicted of fraud for telling people the machine could do that.
Ventrepreneur: An ventrepreneurs is an entrepreneur that runs a company that is backed by venture capital. Ventrepreneurs are typically constrained in their decision making by the vision of the VC firm that funds their venture.
Vulture capitalists: VCs that quickly swoop in on struggling startups, hoping to reverse their fortunes (usually through aggressive tactics that have earned them the unpleasant moniker).
Wheelhouse: The key strength or area of expertise of a company or individual.
Example: "Keeping his mouth shut on Twitter is just not in his wheelhouse. We should replace him with a CEO that shows more restraint and doesn’t jeopardize the success of the company."
Zombie funds: The poor souls of the VC world that invested in the wrong venture, at the wrong time only to see its valuation crash. They roam the streets of Silicon Valley, begging anyone they encounter to rid them of their equity in the beleaguered startups.