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Entrepreneurial Key Terms

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Venture Capital

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Financing provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential.

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Startup

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A company in the first stages of operations, often characterized by high uncertainty and risk.

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Market Analysis

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The study of the attractiveness and dynamics of a special market within a special industry.

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Business Model

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Plan implemented by a company to generate revenue and make a profit from operations.

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Bootstrapping

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Building a company without external help or capital and relying on personal finances and revenue from the business.

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Angel Investor

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An affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

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Burn Rate

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The rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations.

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Minimum Viable Product (MVP)

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The most pared-down version of a product that can still be released to market with a core set of features that allows it to be deployed and tested.

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Proof of Concept (POC)

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Demonstration to verify that certain concepts or theories have the potential for real-world application.

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Scale-Up

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The process of increasing the size or scope of a business's operations.

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Lean Startup

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A methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable.

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Pivot

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A structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.

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Crowdfunding

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The practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.

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Social Entrepreneurship

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The use of startup companies and other entrepreneurs to develop, fund and implement solutions to social, cultural, or environmental issues.

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Incubator

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An organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services.

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Accelerator

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A fixed-term, cohort-based program that includes mentorship and educational components, culminating in a public pitch event or demo day.

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Exit Strategy

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A planned approach to exiting a business which aims to reduce or liquidate one's stake in a financial asset.

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Value Proposition

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An innovation, service, or feature intended to make a company or product attractive to customers.

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B2B

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Business-to-Business, describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

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B2C

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Business-to-Consumer, describes activities of businesses serving end consumers with products and/or services.

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Competitive Advantage

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Conditions that allow a company or country to produce a good or service at a lower price or in a more desirable fashion for customers.

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SWOT Analysis

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A framework for identifying and analyzing the internal and external factors that can have an impact on the viability of a project, product, place, or person.

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Elevator Pitch

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A succinct and persuasive sales pitch that is theoretically the time it takes to ride an elevator.

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Early Adopters

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The first customers who use a new product or service after the innovators have already tested it.

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Business Plan

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A formal written document containing business goals, the methods on how these goals can be attained, and the time frame for achieving them.

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ROI

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Return on Investment, a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

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Disruptive Innovation

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An innovation that significantly alters the way that consumers, industries, or businesses operate.

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Mentorship

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Guidance provided by a more experienced person to a less experienced person within a company or industry.

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Cash Flow

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The net amount of cash and cash-equivalents being transferred into and out of a business.

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Equity Financing

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The method of raising capital by selling company stock to investors; in return for ownership shares, the company receives cash from the shareholders.

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Debt Financing

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When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors.

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Organic Growth

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Growth rate a company can achieve by increasing output and enhancing sales internally, without mergers, acquisitions, or takeovers.

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Market Penetration

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The amount of a product or service that is sold to its target customers, compared to the estimated total market for that product or service.

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Market Segmentation

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The process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics.

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Brand Equity

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The value premium that a company realizes from a product with a recognizable name when compared to its generic equivalent.

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Balance Sheet

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A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

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Income Statement

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A financial statement that measures a company's financial performance over a specific accounting period.

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Leverage

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The use of various financial instruments or borrowed capital—such as margin—to increase the potential return of an investment.

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Liquidity

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The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.

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Opportunity Cost

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The cost of an alternative that must be forgone to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

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Profit Margin

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A measure of profitability. It is calculated using the formula: Profit Margin = Net Profit / Revenue.

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Supply Chain

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A system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

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Total Addressable Market (TAM)

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The total market demand for a product or service. It is the most amount of revenue a business can possibly generate by selling their product or service in a particular market.

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Unique Selling Proposition (USP)

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The factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition.

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Working Capital

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The capital of a business that is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.

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Innovation

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The process of translating an idea or invention into a good or service that creates value or for which customers will pay.

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