How to build a startup

By Joni Lehto

Updated 7.4.2020

How to build a successful startup? This guide attempts to answer this question as well as the what and why of building startup. It is written from a Finnish perspective for a prospective CEO of a new startup.

Building a startup starts with an idea. The idea you often start with is very different than what ends up working – if it ends up working. The process of verifying whether your idea works as a business is called validation. We’ll spend a chapter speaking about that.

Don’t worry, all the chapters here are intentionally short, so you can start putting all of this into practice in no time. We’ll cover only the key points to give you a good general understanding of the world of startups you’re about to enter.

The next most important thing to cover is the team. There are reasons why a strong and motivated team is an absolute must for practically every startup, why you should start building one as early as possible, and how to go about doing it. Spoiler: communication and pitching will become very relevant so we’ll talk about them too.

With a team and a validated idea you’ll be able to build a pilot version of your solution. This is often called an MVP (minimum viable product). This is closely tied into the art of building a business, which is a broader topic. Again, we’ll go through just a couple of key points because this guide covers only the most generic parts of building a startup, and a lot of the business-building parts vary a lot based on the exact kind of startup you’re building.

At around this time most startups start needing funding. This is also one of the least-understood parts of startup building. We’ll answer questions like what kind of funding sources there are and what are their main differences, when should you consider which one, and how to handle the fundraising process.

After the startup’s business is growing and you have seasoned investors or other industry veterans in your board of directors or advisory board, the startup is already well on its way to becoming a scaleup instead of a startup. At this point companies start to be so different from each other that very little generic advice applies. At least very little that I am aware of. Perhaps I’ll learn something to add here later. But let’s not get ahead of ourselves. Before covering the idea, let’s start with the fundamentals.

What is a startup?

A startup is a small company that intends and has the potential to become a big company in a short period of time. This typically means that it’s a new company, but that’s not relevant. It may not even be registered yet. What’s important is that there is the potential and the intention to grow something small into a big business in short time.

It’s important to distinguish between startups and non-startups for several reasons. For example a hair salon or kiosk can be a new company or a small company, but they don’t typically aim to grow into big companies so they’re not startups. This is relevant for many groups for different reasons. We’ll talk later about the point of view of investors, employees and clients, but for the economy and society there’s a vast difference between high-growth companies and small companies. High-growth companies are responsible for the vast majority new jobs created and innovations made available for everyone’s benefit. It makes sense to give a bit of extra public sector support for those trying to build them.

Another key startup term is scaling. It means increasing operations rapidly, for example by increasing sales from 100 to 10,000 units/month. Scalability refers to how easy this is in comparison to other businesses. Digital software like games are extremely scalable: once built and sold online, your operations don’t need to be much different whether you’re selling 100 copies or a 100 million copies, as everything happens digitally. Most consulting businesses are a lot slower to grow. When you’re billing clients for your employees’ working hours, doubling your sales means doubling your employee count, and hiring and training people takes time.

In terms of numbers, startups typically aim to grow 100% or more year-on-year for multiple years in a row. Businesses growing steadily 10-30% a year are growth companies. Companies somewhere in between these are high-growth companies. A startup that has already grown big is a scaleup, and not really a startup anymore in most senses of the term. These boundaries are very rough approximations to give you a general idea of what these terms usually refer to.

Should you become a startup entrepreneur? That depends on what kind of a life you want to live right now. If you crave stability, routine and clear boundaries, being a startup founder might not be for you. If you like to make use of everything you know, enjoy variance more than structure and like flexibility more than you dislike uncertainty, working in a startup might just be your thing. For many people, later-stage startups and scaleups strike a good balance between income security and offering a place in the frontier where the future is being made.

A word of warning though: if your main motivation in building a startup is to become rich, there’s a high chance you’re taking the wrong path. Ambition is a good partial motivator, but greed is blinding. Most startups so far have failed despite the years of time and effort by the founders. One of the reasons is that building a startup is fraught with so many uncertainties that it’s financially a lot like buying a very expensive lottery ticket. For financial gain it’s much better, on average, to have a well-paying job. All the experience and networks you gain in the job will also help you build a startup later, should you so choose. Building a solid growth company instead of a startup is also a great way to gain both money and experience without the risks that come from aiming at extreme growth.

Another reason why so many startups have failed is that the founders haven’t known the current best practices of building a startup. This guide is an effort to fix this.

Idea and validation

Every business starts from an idea. Business ideas consist of three key parts: problem, solution and business model. A problem could equally well be called a need for something, but problem is the standard term.

Many startups focus far too much of the solution and overlook the assumptions they make about the problem. The most common reason for startups to fail is that they overestimated the demand. Countless startups every year are surprised to find that too few customers want to buy what they’ve created and end up closing their unprofitable business.

The best thing you can do for your startup is to identify the assumptions you’re making and validate whether they’re true or false. Building a startup is an action research project. Start with the most critical and broad assumptions and upon each validation, progress to the next most important one.

First, you need to find a customer with a problem they’re willing to pay for you to solve. Don’t take their word for it: we humans find it hard to predict our actions. To validate a problem you have to really go into research mode, find the right kinds of people and ask the right kinds of questions. To learn more about these I recommend watching Rob Fitzpatrick’s Prototyping everything (16 minutes).

Your original assumption of a valuable problem is a good starting point of a problem space to explore. On a rare occasion a startup ends up doing what they originally imagined to be doing; this is sometimes the case with startups founded by industry veterans or business-minded researchers. It’s important to understand that even these cases aren’t overnight successes. They’re based on years or decades of getting to know the problem space thoroughly. The vast majority of successful startups ended up doing something different than they originally set out to make, so keep an open mind.

After validating a problem worth solving, the next task is to validate a solution that can be turned into a business. A good solution is possible, profitable, marketable and scalable. Possible means that you are be able to do it with the right team. Profitable means that it costs less for you to produce than what your customers are willing to pay for it. Marketable means that you are able to convince customers to buy it while keeping your customer acquisition cost lower than your customer lifetime value (CAC < CLV). Scalable means that you’ll be able to grow the sales and production rapidly. If your solution is not the most scalable one, don’t worry: it may still be a great business. You just might have to do it without the supports that are strictly startup-only, such as most venture capital funding.

Once you have potential customers with a valuable problem and a good solution idea that has them screaming “just take my money already”, you have found a problem-solution fit (PSF). The next task is to make sure your solution, business model and pricing are so right that you can start making and growing sales. Once done, you’ve achieved a product-market fit (PMF). While moving from PSF to PMF you’ll be identifying and validating assumptions about product and business model specifics with real customers. You’ll often be selling pilot projects or versions to companies or individuals who want to be pioneers, the first ones to lay their hands on and get experience with the next generation solution.

At this stage you have to be able to actually build the solution, starting with a proof-of-concept (POC) version that shows that the solution is possible, and then gradually progress from POC to a pilot to an actual product that people can use and are willing to pay for. Unless you have one already, it’s high time you built a team.

Startup teams

A good startup team will be able to do what needs to be done next and to attract new team members as the startup grows. As startups and their needs change over time, startup teams are bound to change too, and successful startups need to grow their teams fast. Building the team is one of the key activities of a startup founder.

Every startup is a little bit different, but virtually all need to be good with marketing and selling to their customers and getting their feedback, ideating, designing, building products, managing finances, intellectual property rights and people, developing business models and strategies, pitching and otherwise communicating with potential investors and other stakeholders, and managing their legal responsibilities.

It’s great to understand a little bit of everything, but the best designer is rarely also the best manager of finance, technology and communications. Different types of personalities also seem to thrive in different roles. Diverse teams also generate better results and are less likely to make critical mistakes as they are able to consider more viewpoints on any issue.

Even if you would be the leading expert in every area of responsibility and would have the experience and personality to look at every issue from every relevant angle, you’ll still only have a limited number of efficient working hours every week. If you’re a solo founder speaking with a client, no one is building the product, communicating with the investors or speaking about your solution to the press. A good team just gets so much more done every single day that solo founders don’t stand a chance. Building a startup is a team sport.

When you’re satisfied with your core team and you want to start spending serious time together, it’s time to make a shareholders’ agreement (SHA) to clarify everyone’s rights and expectations of what happens in different scenarios, such as if someone wants to leave the team after putting in a year’s worth of hard work into it. There’s a good standard template at SeriesSeed.fi. Use it with reasonable modifications to your case, but be careful about changing any of the logic. It increases the chances that you’re making your life needlessly hard if something happens in a way that you didn’t predict. The standard template is shaped by the experience of hundreds of startups and investors. Any big changes you’d make might also be rendered void later, as a VC might not agree to invest until all the shareholders agree to a more standard SHA. Consulting a lawyer before signing a SHA can be a good idea, but won’t change the fact that you should understand everything in the document yourself. Luckily the standard template is quite straight-forward.

Startup boards

A startup team is a loose concept. When used in its broadest sense, it refers to the full-time leadership team (in the beginning: the co-founders), board of directors and the advisory board, and the employees. All of these contribute to a company’s knowledge pool and networks. Of these four groups, the significance of both boards are the least well understood.

In a fledgling startup, the co-founders are the only ones in the company, serving all roles. Every startup should start looking for advisors as early as possible. The role of an advisor is to help the company through their experience and networks. They put less time and more knowledge and network benefits into the company. It’s crucially important to have the best possible insights into what and how to do next, so the company avoids wasting valuable time by doing the wrong things or the right things in an inefficient way. The connections of an advisor can also be a significant boon for a company, making a crucial difference in a company’s ability to identify and attract a huge client or investor.

A board of directors can be much like the advisory board, but has more power over the company and they also have legal responsibilities. In Finnish law, company shareholders vote for the board members. Some board seats may be reserved for the representative of a specific shareholder, such as a venture capital fund, in a separate agreement. Every board member has a legal responsibility to act in the best interest of all shareholders. The board decides on company strategy as well as the hiring and firing of the CEO, in addition to any other things the company has decided will belong to the jurisdiction of the board, which could include executive compensation and financial transactions over a certain size. Almost everything else is decided by the CEO, including the organization and operation of the company’s daily activities.

Ideally, the chairperson of the board and the CEO collaborate very closely but are usually not the same person. Both see the company from a strategic perspective, but the CEO has to spend a lot of time managing practicalities of execution while the chairperson’s point of view is more purely strategic. It’s also extremely valuable for the chairperson to have extensive experience for the CEO to draw upon when making tough operational decisions. A good chairperson is the closest sparring partner of the CEO, shaping company strategy together and helping the CEO succeed.

Many boards have meetings once a month, but there’s no requirement to do so. Some advisory boards or boards of directors meet every two or three months. For most startups this is quite infrequently, as things develop rapidly.

Funding

What are the most important sources of funding for a startup?

  1. Revenue
  2. Public funding
  3. Loans
  4. Capital investments

If you have enough revenue, you don’t need anything else. Every other source of funding exists only as a temporary aid while you seek to increase your revenue.

Public funding often offers more favorable terms than the private capital market. In many cases public funding is free money, with the only costs being the time it takes to apply and manage its reporting, and the potential deviations in strategy it may lure you to make. The most important public funding instrument in Finland is Business Finland’s Tempo, which has been used by every successful Finnish startup that I know of. They have a number of other instruments as well that every Finnish startup should get familiar with. If you can get money like this that doesn’t need to be paid back, go for it.

Loans are a little bit riskier. No matter how great terms you get, they have to be paid back in some point. If you spent a loan to do something risky, like building a product without a contractually committed buyer, and things don’t turn out well, you may end up losing the company and all its intellectual property rights to the debtors. You may also have to personally guarantee a part of the loan amount, in which case you’ll be paying that much back if your company defaults the loan. Organizations like Finnvera offer significant loan guarantees for promising Finnish companies, reducing (but not always eliminating) the need for personal guarantees. Professional lenders are also experts at evaluating the risks, so if you get a loan offer on good terms, they believe the risks you’re taking are reasonable, at least for them. Loans are suitable for the most solid business cases, especially those who already have sales. The upside of a loan is that apart from having to pay it back with interest, you won’t lose any ownership control or share of future profits.

Capital investment means that you sell a part of your company to someone, such as angel investor or a venture capital fund. You will lose that much ownership and control in the company as well as future profits – or more, depending on the terms you’ve agreed to. On the upside, you may gain a great supporter for your company, who brings in not just money but also expertise and networks. Some investors make great board members (and some won’t invest unless they get a guaranteed seat at the board). You won’t have to personally pay back any of the investment if the company fails, as long as you didn’t do anything criminal. Most startups seek capital investments for these reasons, and because loans are often not available until the company has become more stable.

To recap: Always seek revenue, and use free public funding if available and its requirements make sense. Choose wisely between loans, investments, neither or both. The next section will help you in this.

When to seek a risk investment

When should you seek risk investments? No one answer covers all scenarios, but the situation should make sense both for the investor and investee (your company). You’re extremely unlikely to get funded if all you have is an idea. A good idea helps a lot, but it’s only the first baby step on the marathon of building a startup. On the other hand if you have customers who cannot get enough of your solution and you want to expand your operations to serve the global demand, many investors couldn’t wait to get to hear more from you.

Here are a couple of examples to give you a bit more of an idea.

Example 1. You’re part of a four-person team that has built a business that is growing, and there’s plenty of room to grow more and become very profitable. The company is even making a small profit already. You’ve started in the smart way and kept your day jobs, and you’ve taken a problem-solution idea as far as to have paying customers. You could grow the business a lot faster if you quit your day jobs, but the current revenue wouldn’t be enough to cover your mandatory expenses. You could have only one of you quit their day job and focus on growing the business, but that would lead to bottlenecks elsewhere that would hinder your growth. All the time you run the risk that another competitor makes a similar offering and starts to market it with a full-time team, possibly taking the market from your part-time team.

This has the makings of a very good investment case. There’s significant indication of demand and the team’s ability to execute. An investment could make business sense for both the team and the investor. The team would increase their chances of success significantly by being able to work on this full-time and possibly even hire others to help them. The investor has reason to believe this team has a good chance to succeed and yield a profitable return on investment (ROI).

Example 2. The same as example 1, except the company is currently not profitable. It’s making revenue, but the unit cost is so high that it’s making a net loss.

This doesn’t change the situation much, as long as the investment would make the difference for the company being able to decrease their unit cost to become profitable. Startup investors, especially early-stage ones, don’t look for profitable companies. They look for companies that can become very profitable with the help of the investment. In fact, most investors want startups to invest all of their operating profits into accelerating their growth. This will lead to net loss now in pursuit of much higher profits later.

Example 3. The same as example 1, but some parts are missing. Maybe the team is missing a key person or two. Maybe there are many happy users, but very few are paying for the product.

This is more questionable as an investment case and depends on the specifics. The vast majority of cases presented to early-stage investors are in this category, but many of those that get funded are either not missing too many parts of example 1, or compensate for that with other strengths. For example maybe there are no users yet and the team is missing a designer and a business developer, but there is significant proof of the business value of the technology and it’s very hard to imitate.

Example 4. Just an idea. Or a solution looking for a problem, with weak indications of its business value.

This is not an investment case. Surprisingly many cases that first-time startup founders think are super lucrative will look like this for seasoned investors and other outsiders. For many investors, your startup baby is only as beautiful as you can prove it to be.

However, not all investors are similar.

Different types of investors

Angel investors are individual people investing their own money. You can be an angel investor too if you save up. Don’t rush though, angel investing is very risky. Experienced angel investors invest in groups called syndicates. A company seeking €100k might attract one angel investing €20k, two others investing €10k each and 12 more investing €5k each. Investors manage their risks by investing €5k in 10 companies rather than €50k in one company. They’ll also learn much more from each other by working as groups. Every syndicate has a lead, who acts as the contact point between the investors and the company. From the company side it’s usually the CEO who is responsible for the fundraising process and handles the discussions and negotiations with the lead angel.

Because angel investors are individual people, they can invest into whatever they like. Occasionally this means that someone invests into a company whose mission they believe in more strongly than its business potential, but this is rare.

Angels typically invest in very early stage companies. Not as early as some founders hope, but angels may well invest into companies that are pre-revenue. Typical investment ticket sizes vary between €5k-30k, but some angels may invest a lot more.

Venture capital funds (VC) are organizations. You can compare them to banks that take money in from many sources, and then invest it forward in an agreed way with the goal of returning a profit for their investors. A person or organization investing into a venture capital fund is a limited partner (LP). The company managing the fund’s activities is the general partner (GP). Its top managers are typically called managing partners (MP). They have the highest influence on whether an investment will be made. Helping them find investment cases and work through them are investment directors/managers, and helping them are analysts. If an analyst likes your case, it’s a good start but still far off from being funded. If a managing partner tells you they like your case, you’re much closer to becoming funded. In the end, the final decision will be made by their investment committee, which may include the biggest LPs.

VC funds typically have a ten-year lifetime. In the end of which they return their capital to the investors, and if they made a profit the top managers get a part of that as a bonus. These ten years are commonly divided into two five-year periods. During the first they make new investments, and during the second they make only follow-on investments into the companies they have already invested in (aka. portfolio companies).

A VC fund has to turn their investments back into money by the end of their ten years, so they’ll only fund companies who are able to provide an exit event for them in that time frame. Exit means someone else buying their shares, preferably at a huge profit. It could be another VC fund, another large company or the general public through a stock exchange. Company managers taking a loan and buying other investors out (management buyout, MBO) is also possible, although rarely the ideal outcome for investors.

If your discussions with a VC become serious, at some point you should find out how long do they have left in their life cycle. If they’re on year five, you have less than six years to provide a return on their investment. Building a startup takes a long time, and unless you’re very advanced, there’s a chance it’d be better for the company to provide an exit event eight rather than six years from now. In order to provide a profitable exit in six years, investors might pressure or force you to take risks you might not otherwise take.

One VC company can manage multiple funds at the same time. It’s typical for VCs to time their efforts to raise new funds so that they could start making new investments from a new fund immediately after their earlier fund’s investment period closes.

Many VCs require a board seat and other favorable control and financial terms as a condition for their investment. Read about these before you negotiate a term sheet with investors, preferably at the very start of your fundraising process. This way you can decide which terms are the most important for you which not, helping you focus your negotiating efforts and speeding up the discussions. You will also want to have a good lawyer experienced in these kinds of deals to go through any terms with you, but remember that they’re there to help you avoid certain kinds of mistakes, not to decide everything for you.

Nothing can replace the need to understand what you’re negotiating. Good advisors will be worth their weight in gold in building that understanding. Books like Mastering the VC Game by Jeffrey Bussgang and Venture Deals by Brad Feld are also an invaluable help.

Most VCs, as well as some angels, allocate most of their money into follow-on investments. These are further investments into companies that they’ve already made an initial investment into and which are performing well. A VC that invests €150k initial tickets might invest a further €500k into their best portfolio companies (and not a dime into those that don’t show enough promise anymore).

Every VC has different investment specifications. Some invest only in hardware companies, others only in B2B SaaS. Some only in gaming companies, others in everything except games. Some only invest alone, some prefer to lead investment syndicates, some to co-invest in a non-lead role. Most have geographic limitation and preference. Some might prefer to lead near their home region and co-invest elsewhere. Everyone has a ticket size range and a preference for companies at a specific stage of development and consequently, valuation range.

Corporate venture capital funds (CVC) are different from other VC funds in several ways. The most universal difference is that they’re owned and managed by a corporation that has its own strategic interests. When discussing with a CVC, be sure to find these out. Having a CVC as an investor and a board member may be a great help, a great hindrance or both. You may have a hard time cooperating with their competitor or doing other things that conflict with the corporate strategy or mood. On the other hand you may get unparalleled support from top industry experts and the corporation’s resources, such as production or R&D facilities. Some CVCs only fund companies with the goal of buying them completely if they’re successful; some only require a loose connection to the corporate strategy in addition to the usual expectation of a positive return on investment.

Time frames

Startups take a long time to build, on average around 7-10 years until their growth starts to slow down and they’re profitable. Few investors want to wait that much or longer to get a return on their investment, and most would like their money back sooner rather than later. Many angels and VCs will be happy to get a good return early so that they can reinvest it in other companies. Sometimes the next investor is the exit for the previous one: a VC might buy the shares of an angel investor, who is happy to make a certain 2 x profit in two years instead of an uncertain 3 x in four or more years.

As a startup founder, it’s crucial to understand the length of the journey you’re embarking to. Don’t be fooled by the jackpot cases of overnight successes you’ve heard in the news. They’re the rare exception. Many marriages last shorter than startup careers. The only thing you’re guaranteed to get out of your startup experience is precisely that – experience. At the point when you do get funding or revenue, you can also start drawing a salary, but especially if you’re relying on funding, salaries mean that you’re losing money every month, steadily approaching the point when you have to start spending a big part of your time seeking more funding.

Attracting funding takes typically 4-6 months counting from the start of discussions with the investor who ends up investing into you. The time spent preparing for the funding round, looking for investors and communicating with ones that didn’t end up investing in you comes on top of that. From the start of discussions it usually takes a couple of weeks until you’ve convinced them enough that they want to invest into you. You’ll meet them, have a proper presentation to some of them, maybe another one to more of them, and provide additional material that can be used to verify your key claims and calculations. If they’re satisfied, you’ll discuss the key terms of what both sides are looking for in the deal and if you reach a general agreement, they’ll offer you a term sheet. This is a non-binding letter of intent from their side, but can be quite binding from your side: it’s bad form and a waste of everyone’s time to try to negotiate key terms after this point, and it may include a no-shop clause that prevents you from negotiating other investments while you’re finalizing this one. However, one hurdle is still remaining: the due diligence process (DD).

Due diligence means that the investor puts in a reasonably high effort to make sure that their investment of their LPs money into a company is justifiable. In practice this means looking for hidden land mines and time bombs. They’ll need to see good documentation of the company’s financials, corporate governance (incl. minutes of the meetings of the board of directors and agreements with clients, shareholders, employees and so on), intellectual property rights (incl. best possible proof of not infringing on others’ IPR), background check of key directors (history of deceit such as tax evasion will be a red flag), calls to key customers and industry experts, and otherwise verifying that the company’s key claims are true and that the company is in good health. Depending on how well your company has documented things and how fast you provide the requested documents to the investor, this can take weeks or months.

If your company needs money by Christmas, you should start fundraising by Easter.

When you’re raising money, try to raise enough so that you don’t have to start raising the next round too soon. 18-24 months is a great runway. Fundraising is laborious work, time which is away from business development.

Other startup terms

Burn rate = Losses per month.

Runway = How long company funds last with the current burn rate.

Investment round = How much money a startup is looking to raise right now. Often just called a round.

Investment ticket = The size of an investor’s investment into one company. Often just called a ticket.

Portfolio = The companies an investor has invested in.

Funding stages pre-seed, seed, series A, B and so on = These terms are very imprecise and have no standard meaning. A long time ago series A simply meant the first round of investing. Most investors of that time invested in companies of a certain level of maturity. Some started investing into earlier-stage companies, calling themselves seed investors. Then some started investing even earlier, calling themselves pre-seed investors. Nowadays I’ve often heard pre-seed and seed stage to be used almost synonymously with pre-revenue and revenue, but there’s no standard definition of when does a company move from a pre-seed stage to seed or series A. It’s much more precise to speak of a company’s funding round size or an investors’ ticket size range along with the revenue size or expectation.

Bridge funding round = A small intermediate funding round to extend your runway until the next big funding round.

MVP = Minimum viable product. Whatever works as the cheapest and fastest way to test an assumption. It doesn’t need to be a product in the traditional sense.

PSF = Problem-solution fit.

PMF = Product-market fit.

POC = Proof-of-concept that shows the solution is possible.

Pilot product = A version for early customer use. Not ready for selling in scale.

Pilot project = Testing an early version with a customer.

Product = A mature offering that can be sold to many customers. Often used broadly, meaning that it doesn’t need to be a physical or digital product, can be a service or another form of solution.

ROI = Return on investment. Getting more money back than you put in.

Unit economics = The profitability of each sale (how much you earned selling one product minus how much you spent making it). This has to be profitable for a company to be sustainable, but doesn’t need to be profitable at the start if you are able to attract funding to keep the company alive while you’re improving unit economics until profitability. Contrast with fixed or one-off earnings or expenses, such as office rent or R&D costs. Good (potential) unit economics is a major criteria investors look for.

CAC = Customer acquisition cost. How much money you’re spending to get new customers divided by how many new customers you’re getting. If you spent €1,000 to get 20 customers, your CAC was €50.

CLV = Customer lifetime value. If an average customer buys a product that nets you €50 one one year, an add-on netting you €20 the next year, and nothing after, your CLV is €70.

CLV / CAC = One of the most important equations in business: how much more you earn per customer than you spent getting them. Any business where CAC < CLV is doing a gross profit, and if the total is larger than their fixed and one-off costs, they’re doing a net profit too. It’s typical for startups to focus on improving their CLV / CAC ratio early, then invest heavily in scaling up their operations, and once they’ve become scaleups and their growth slows down, to reduce their fixed and one-off expenses to a level where they’re (very) net profitable.

SHA = Shareholders’ Agreement.

DD = Due diligence. A fact and background check.

IPR = Intellectual Property Rights. Copyrights, patents and so on. Be sure not to infringe others’ IPR or your whole business is at risk.

VC = Venture capital. Commonly used to refer to a fund, a company managing several funds, or a person working in a VC company.

CVC = Corporate venture capital. A VC fund that serves a large company’s strategic interests.

Angel investor = Someone investing their own money into startups.

B2B = Business to business. Selling to other companies.

B2C = Business to consumer.

B2B2C = Selling to other businesses who sell your solution to consumers.

B2G = Business to government. Generally slow and hard.

SaaS = Software as a service. Selling software only for a certain time. Usually combined with a recurring monthly or yearly billing. Investors love recurring sales as they tend to lead to a higher CLV and more revenue predictability.

MRR = Monthly recurring revenue.

ARR = Annual recurring revenue.