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Startup Glossary

Starting A Company? The Key Terms You Should Know | Startup School

Burn rate, MVP, TAM — if you’re interested in tech and startups, you probably hear terms like these regularly. But what do they really mean? In this episode of Startup School, Managing Partner Dalton Caldwell breaks down some of the most common terminology that you’ll come across in the startup world.

Transcript

0:01 foreign
0:03 [Music]
0:09 I'm Brad Flora I'm a group partner here
0:12 at YC and I'm going to be talking about
0:13 how startup fundraising works today like
0:16 I said I'm a group partner at YC and
0:18 what that means is that I read
0:20 applications I interview the startups
0:23 that apply and then I work with them to
0:25 try to make something people want and Fundraising resources
0:27 one of the topics that people ask about
0:29 all the time at YC is fundraising in
0:32 fact it's probably the thing that we get
0:34 asked about more often than anything
0:36 else and the reason for that is because
0:38 as Paul Graham wrote years ago raising
0:41 money is the second hardest part of
0:43 starting a startup after making
0:44 something people want so let's take a
0:46 quick tour of all the awesome stuff that
0:48 YC's put out about fundraising over the
0:49 years first there's the Paul Graham
0:51 essays he wrote the fundraising Survival
0:53 Guide how to fund a startup how to
0:56 convince investors to invest in your
0:58 company and even wrote a great essay
1:00 about understanding investor herd
1:02 Dynamics all of the stuff's online you
1:04 can see the links below you should check
1:06 it out years later just a little bit ago
1:08 YC president Jeff Ralston posted a
1:11 terrific guide to raising a seed round
1:12 where he covers everything from start to
1:14 finish that you need to know the Nitty
1:16 Gritty on how to raise a seed round and
1:19 he gave a great video presentation at
1:21 startup School a few years ago where he
1:22 presented that material it's on YouTube
1:24 you should check it out it'll tell you
1:26 how to raise a seed round finally we've
1:28 posted a lot of tactical guides about
1:30 specific aspects of fundraising how to
1:33 build a seed deck how to pitch your
1:35 startup how to get meetings with
1:37 investors and how to raise money online
1:39 for startups using platforms like Angel
1:41 list we've even got something about the
1:43 different types of investors and their
1:44 incentives so if you really want to get
1:46 specific and drill into stuff there's
1:48 content for you that you can find what I
1:50 didn't want to do today is just rehash
1:52 all of that stuff because it's already
1:53 out there what I wanted to do instead is
1:56 talk about some of the misconceptions
1:58 and myths that we see as YC Partners
2:01 when we work with Founders Founders out
2:04 there are consuming all sorts of
2:05 information in the media and a lot of it
2:07 is about startup fundraising and there's
2:10 some things in there that just are not
2:11 true that we're going to talk about the 7 fundraising myths
2:13 goal of this talk is to catch you up on
2:15 how fundraising actually works today and
2:17 we're going to do that by exploring
2:19 seven fundraising myths and for each one
2:21 of them we're going to talk about the
2:23 myth the reality behind the myth and
2:25 then look at some great YC companies
2:27 that bust that myth before we get
2:29 started just a little bit more about me
2:31 I'm a YC partner but I've also been on
2:33 both sides of the table as a founder and
2:35 an investor from 2008 to 2014 I was
2:38 building startups and the company that I
2:40 got the most success was perfect
2:42 audience which was an ad retargeting
2:45 startup for small businesses I took
2:47 perfect audience through the YC summer
2:48 11 batch 11 years ago and we raised a
2:52 million dollar seed round after demo day
2:54 I hired a bunch of great people we grew
2:57 to three million dollars in revenue and
2:58 we were acquired in 2014. after that
3:00 acquisition I got really into investing
3:03 in startups it started with Angel
3:05 Investing where I was writing just a few
3:07 checks five thousand dollars ten
3:09 thousand dollars into YC companies that
3:12 I thought sounded really cool at demo
3:13 day but I got hooked the thrill of going
3:16 and meeting Founders finding out what
3:18 their deal is trying to figure out are
3:19 they making something people want should
3:21 I invest was too much for me and
3:23 suddenly I was raising a fund with some
3:25 friends to scale up and invest in even
3:27 more YC companies and so through that
3:29 fund I invested in 150 YC companies and
3:32 the good news for my backers is that we
3:34 got into some great companies you may
3:36 have heard of a few of them deal open C
3:39 retool razor pay it was really awesome
3:41 to help those companies raise their
3:42 first round funding and it's been a lot
3:45 of fun being involved since eventually
3:47 though I joined YC as a group partner
3:49 and I get to do both sides I get act as
3:52 a Founder as a fellow peer to the YC
3:54 Founders and help them figure out how to
3:55 make something people want and then use
3:57 my investor experience to help them
3:59 figure out how to raise money so I've
4:01 got a good view of this I've been
4:02 involved in a lot of seed fundraising so
4:04 let's get started with these myths and Raising money is glamorous
4:06 for the first one I want to talk about
4:07 is this idea that raising money is
4:11 glamorous what's the image in your head
4:13 that you think of when you think of
4:15 startup fundraising for a lot of you it
4:18 might be something like this this is an
4:20 image of Shark Tank and it's a
4:22 television show where entrepreneurs they
4:24 dress up they make a sign they get a
4:27 bunch of materials and they pitch a
4:29 bunch of investors at once called sharks
4:32 and these are a bunch of people of
4:34 varying levels of investor expertise who
4:36 hear the pitch ask a bunch of uh nosy
4:39 kind of pushy questions and then fire
4:41 offers that the founder rapid fire and
4:44 so if you watch this you may be thinking
4:45 gosh I've gotta put a whole presentation
4:48 together like this and I'm gonna pitch a
4:50 bunch of people and they're going to ask
4:51 me all these tough questions and it's
4:52 going to be this high pressure situation
4:54 nation that I've got to figure out the
4:56 reality is that fundraising actually
4:58 looks like this this is a picture taken
5:01 in the creamery which is a now departed
5:04 Cafe in San Francisco notice what's
5:06 happening here it's just a bunch of
5:08 people sitting in chairs talking quietly
5:11 amongst themselves right it's just a
5:13 bunch of coffee chats that's how
5:15 fundraising actually looks that's what
5:17 it actually feels like is just sitting
5:19 in a cafe talking to someone Shark Tank
5:21 the pitch competitions the business plan
5:23 competitions they're just for show
5:25 they're marketing events for the
5:27 organizations that put them on and in
5:29 fact a lot of the investors at these
5:31 things they don't invest they're just
5:33 there to meet other investors and hang
5:34 out and even on Shark Tank I think Mark
5:37 Cuban recently said that even though
5:38 he's put 20 million dollars into these
5:40 companies he hasn't made a dime yet he's
5:42 still in the red actual fundraising is
5:45 just a bunch of one-on-one meetings on
5:47 Zoom over and over again while you try
5:50 to collect checks and convince investors
5:52 It's a Grind okay what you see here is a
5:55 diagram that was made by an actual YC
5:57 company called fresh paint that shows
5:59 what an actual round of fundraising
6:01 looked like for their startup you see at
6:03 the top the company in each one of these
6:05 circles and squares represents a
6:07 different investor that they met with
6:08 and when the boxes are connected it's
6:10 because that investor made an
6:12 introduction for them they met with 160
6:14 investors and 39 of them said yes which
6:17 is a very high conversion rate but the
6:18 check range was all over the place they
6:20 had people write 5K checks and people
6:22 write 200k checks all right not
6:24 everybody with some fancy VC they could
6:26 write a giant check and it took them
6:28 four months and 18 days to get through
6:31 all these meetings and close all these
6:33 deals and that was to raise 1.6 million
6:36 dollars fundraising was painful and it
6:38 was a grind but it was pretty
6:39 straightforward it was just a bunch of
6:41 conversations they've written a great
6:43 blog post that's where this image comes
6:45 from that you can check out should
6:46 definitely read it so great example of
6:49 what it's actually like to raise money The need to raise money before starting a startup
6:51 okay the next myth I want to talk about
6:52 is this idea that I need to raise money
6:55 before I can start working on my startup
6:57 all right we see this a lot with
6:59 Founders we meet people that have a big
7:01 idea which is great and the next thought
7:04 they have is well gosh I guess I need to
7:06 raise money so I can build my big idea
7:08 but that's not how the best Founders
7:10 actually think about fundraising the
7:12 best Founders they build the first
7:14 version of the product first even if
7:16 it's a simple almost toy-like version of
7:20 it and then they go get some users for
7:22 it and then only then when they see that
7:24 people are starting to use it and maybe
7:26 there's some value being created do they
7:28 start thinking about raising money and
7:30 the reason for this is that it's cheaper
7:31 than ever to build a prototype of a
7:33 product to build a first version okay
7:35 it's cheaper than ever to host a website
7:37 and and build software it gets easier
7:39 and easier and easier every year and
7:42 also it's easier than ever to find
7:43 potential users you can get users on
7:46 platforms like product hunt on Hacker
7:48 News you can find users on social media
7:50 Twitter LinkedIn everybody's on the
7:53 internet today and you can use that to
7:55 find early people to try out your
7:57 product and when you do this when you've
7:59 got a little bit of product just a
8:00 little bit and a few users for it it
8:03 immediately gives you a great deal of
8:05 Leverage all right you've gone from that
8:08 person waving the pitch deck around
8:10 trying to figure out how to find 20
8:11 million dollars to someone whose startup
8:14 is in motion and investors want to jump
8:16 on trains that are in motion here's an
8:19 example solugen is a YC company from the
8:22 winter 17 batch and they are a chemical
8:24 manufacturing startup they literally
8:26 make chemicals and sell them as you can
8:29 imagine that is a capital intensive
8:31 business it requires a lot of money to
8:34 build a facility that can make chemicals
8:36 and sell them at scale and a certain
8:38 type of founder that had this idea would
8:41 then make a pitch deck and go around
8:43 telling investors I need 10 million
8:45 dollars I need 20 million dollars to
8:47 build the menu manufacturing plant to
8:49 make these chemicals the solution folks
8:51 chose a different path which is first
8:53 they built a tiny version of their
8:55 reactor that fit on a desk but it worked
8:57 next they built a slightly larger
9:00 version of that that could actually make
9:01 enough hydrogen peroxide to sell and
9:04 they took that to YC when they applied
9:06 for the winter 17 batch and during the
9:09 batch they started making enough
9:10 hydrogen peroxide using this slightly
9:12 larger version of the machine that they
9:15 could go and sell it to First customers
9:17 turned out that hot tub supply stores
9:21 needed hydrogen peroxide to sell the
9:24 people that add hot tubs and so they
9:26
were making ten thousand dollars a month
9:28 selling hydrogen peroxide to hot tub
9:30 supply stores not a ton of money but
9:32
let's step back for a second if you were
9:34 an investor and you were trying to
9:36 invest in a chemical Manufacturing
9:38 Company who would you back the person
9:40 with the pitch deck asking for 20
9:42 million dollars or the people that have
9:44 built a first version of this even if
9:46 it's small and making small amounts of
9:48 the product and selling it to hot tub
9:51 supply stores which is hardly a huge
9:53 business but it's something
9:55 well investors clearly want the second
9:57 Solid Gym is able to raise four million
9:59 dollars for to get started on their
10:01 company because they'd already made some
10:03 progress and today they've since raised
10:05 400 million dollars and they've scaled
10:08 this up to having a full manufacturing
My startup need to be impressive to raise money
10:10 plant let's talk about our next myth
10:12 this idea that my startup needs to be
10:14 impressive to raise money I've got to
10:16 impress people with my startup but my
10:19 startups startup is not very impressive
10:20 so how can I ever do this well the
10:23 reality is you don't need to impress
10:24 investors you need to convince them and
10:28 that's a slightly different thing see
10:29 most startups seem terrible at first and
10:32 in fact the best startups seem the most
10:34 terrible at first so let's take Airbnb
10:38 what was it it was a Marketplace for
10:40 renting an air mattress on someone's
10:42 floor
10:43 terrible idea doordash
10:45 food delivery for the suburbs where it
10:48 takes longer to get everywhere and no
10:50 one's ever started a delivery company
10:51 before
10:52 terrible idea open c a Marketplace for
10:56 selling Collectibles that only exist on
10:58 your computer and can only be paid for
11:01 with magical internet money what but
11:04 investors get this they know that your
11:07 startup is going to sound unimpressive
11:08 early on investors are pretty smart they
11:10 get it and in fact they get bored when
11:12 founders try to impress them okay really
11:15 try to win them over and sell to them it
11:16 bores them about 11 years ago and I did
11:18 YC I had a chance to have a five minute
11:21 meeting with Michael Moritz who at the
11:23 time and it was a partner at Sequoia
11:25 capital is legendary VC and I was so
11:28 excited for this meeting I made a fancy
11:31 deck I practiced all these lines I was
11:33 going to use on him to impress him and
11:35 conv and get him to invest in my startup
11:37 and I sat down with him and I opened my
11:39 laptop to get the slides out and he
11:42 stopped me and just said I prefer to
11:44 just talk about the business you're
11:45 building and I was completely disarmed
11:47
because I wasn't ready for that I was
11:49 ready to impress him not to try to just
11:52 talk about the business that I was
11:53 building and we see this similar
11:55 thinking with a lot of Founders at YC
11:57 where they come to us they don't
11:59 explicitly ask us this but they more or
12:00 less say Brad what are the magic words I
12:03 need to say to make investors want to
12:05 invest in my startup and the reality is
12:07 that it's not about magic words it's
12:09 about making something people want right
12:11 that YC Credo
12:13 it's about making a product getting it
12:16 into users hands and creating some value
12:18 for them and then just explaining how
12:21 there's a one percent chance even just a
12:23 one percent chance that it can get huge
12:25 and using plain simple language to do it
12:28 that's how you convince investors okay
12:30 if investors aren't investing it's not
12:33 because you didn't say the magic words
12:34 it's because your startup isn't good
12:36 enough and you need to make your startup
12:38 better and so have these conversate you
12:40 make your startup better and you just
12:41 explain it to people and talk about it
12:43 like a human and do it over and over and
12:45 over again because again startup
12:48 fundraising is a grind here's an example
12:49 of a company that did a great job
12:51 convincing investors when they met with
12:53 them this is retool and retool makes
12:55 software for building internal tools
12:57 it's a great company they raise their
12:59 seed round you see the founder David and
13:01 one of the CEO and co-founder by just
13:03 meeting a bunch of investors in coffee
13:04 shops in San Francisco I was lucky
13:07 enough to meet with David and he had no
13:08 DAC instead he just opened his laptop
13:11 and showed me the software on his
13:13 computer and he used that early kind of
13:15 crude version of retool to make a crude
13:18 but simple internal tool a little web
13:21 app in minutes
13:22 and then he talked about why his early
13:24 cus

Super Morpheus

Indian Angel Network

Chandigarh Angel Network

Punjab Angel Network

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Tie Angel Network

Be Formidable

Be Authentic

Stick to the truth

Build domain expertise

Wait for the right time

Demonstrate Market Potential

Handle Rejection Gracefully

Pitch with Clarity

Follow the Recipe

𝐇𝐨𝐰 𝐒𝐭𝐚𝐫𝐭𝐮𝐩 𝐅𝐮𝐧𝐝𝐢𝐧𝐠 𝐖𝐨𝐫𝐤𝐬

This visual breaks down how a startup goes from idea to IPO, showing how ownership and funding evolve at each stage:

It’s a constant balance between raising the capital you need and managing dilution.

Pitch Deck Advice

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Purpose & Vision

State your purpose and vision in a concise sentence

Target Audience

Clarify the specific organisations your serve and their problems

The Problem

Describe the financial, business, and personal issues caused by the problem you solve

The Solution

Present a neat and ordered solution slide

Commercial Model

Ouline your pricing structure for different customers segments

Evidence of Success

List Customers, contract values, and a "bow tie" illustraction fo the client pipeline

Future Growth

Highlight key points from your financial model

Unique Advantage

Explain your unique edge, like a technical moat or distinctive feature

The team

Highlight the teams talent, balance of skills, and future talent attraction plans

Market Analysis

Market Viability

Horizon Mapping

Red Seer

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Mindcog

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𝗨𝗻𝗶𝗰𝗼𝗿𝗻 𝗳𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝗱𝗶𝗱𝗻’𝘁 𝗴𝗼 𝘁𝗼 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝘀𝗰𝗵𝗼𝗼𝗹

Unicorn founders did not go to business school, nor did they work at McKinsey. Instead, they were less career-oriented global citizens who typically worked in a startup before they became founders.On average, they had 10 years of work experience prior to founding, mostly within product & engineering, and they almost always lived, worked or studied abroad.

Title Slide

Company: Make it prominent.
Presenters Name & Title: Establish your credibility
Contact Information: Ensure you can reach out after the presentation

Problem Slide

Identify the Problem: Clearly articulate the problem your target market faces.
Emphasize the need: Highlight why this problem needs a solution how.

Underlying Magic Slide

Technology/Innovation: Share the unique identidy behind your product.
Intellectual Property: Mention patents or proprietary technology, if any.
Demonstration: If possible, include a brief demo to illustrate how your product works.

Value Proposition Slide

Your Solution: Present your product or servicecas the soluttion to the identified problem.
Benefits: Explain how it benefits users and why its better than existing solution.

Business Model Slide

Revenue Model: Describe how you make money (sales,subscription, ads etc.)
Pricing Stretegy: Provide pricing on details tiers, if possible.
Customer Acquisition: Briefly plan how you plan to acquires customers.

Marketing & Sales Slide

Market Stretegy: Outline how you plan to enter and grow in the market.
Sales Channels: Describe direct sales, partnerships, online marketing stretegies, tec.
Customer Relationships: Explain how you build and maintain customer relationships.

Team Slide

Team Overview: Introduce key team members with relevant experiences and roles.
Advisors: Mention advisors or board members who add value to your business.

Competition Slide

Competitive Landslide: Identify key competitors and alternatives in the market.
Differentiators: Highlight what sets you part in terms of product , service or technology.

Financial Projections Slide

Financial Projections: Provide a 3-4 year forecast of revenue , profits and major expenses.
Key Metrics: Share important business metrics (customer acquisition cost, lifetime value, chum rate etc.)

Current Status & Accomplishments Slide

Milestones: Detail what you have achieved for so far.
Timeline: Share your roadmap for the next major milestones.
Use of Funds: Explain how you intend to use the investments.

“Startup ideas are not million dollar ideas, and here's an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there's no market for startup ideas suggests there's no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.”“There’s a tremendous amount of craftsmanship in between a great idea and a great product”A lot of people think that a really great idea is 90% of the work, but a great product idea will never turn out as originally conceived.

"It's through the team--through a group of incredibly talented people--bumping up against each other, having arguments, having fights sometimes, making some noise, and working together... they polish each other and polish the ideas. And what comes out are these really beautiful stones."

𝗗𝗲𝗯𝘂𝗻𝗸𝗶𝗻𝗴 𝘁𝗵𝗲 𝗺𝘆𝘁𝗵 𝗼𝗳 𝗶𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻

Learning about your customers

Testing ideas & collecting evidence

Killing ideas at an early stage

𝗛𝗼𝘄 𝘁𝗼 𝗰𝗿𝗲𝗮𝘁𝗲 𝗮 𝗚𝗣𝗧 𝗶𝗻 𝗺𝗶𝗻𝘂𝘁𝗲𝘀

OpenAI CEO Sam Altman reveals how to create a GPT app in under 4 minutes, no coding needed.This marks a major tech shift, enabling anyone to build and sell AI apps.Expect an explosion of new products and solo entrepreneurs in the coming years.

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