03 Sep New To Startup Life? 5 Terms You Need To Know

If you have an idea for a business, and you’re just getting acquainted with the ins and out of startups and startup life, there are a few words you’ve probably already heard tossed around and used interchangeably. Like, angel investor and venture capitalist? What are they? What’s more, what is the difference? Maybe you’ve wondered what co-working is exactly, why are co-working spaces popping up all over the place, and should you be co-working, too?

Though there are plenty of terms to know, we briefly breakdown a few of the most commonly used ones in the world of tech startups we think you should definitely know.

Incubator

By definition, incubate means to sit upon, develop, grow or take form. This is the role of incubators; to develop ideas and provide a place where entrepreneurs grow their businesses, and help them take shape in the form of a winning business model. The workspace provided by incubators is shared by other entrepreneurs and their startups, providing a community of like minds who are on similar entrepreneurial journeys. The benefits of incubators are many, one is being able to incubate your disruptive ideas and business for as long as you want. Other benefits include the ability to tap into a network of experienced entrepreneurial investors, mentors and your fellow startup CEOs and what they know.

Accelerator

Often used interchangeably with incubator, an accelerator is a bit different in that it does for a startup exactly what the word says; accelerate or propelling the growth of the startup rapidly. Unlike with an incubator where you can take as long you want and need to develop and grow your idea, with an accelerator, the idea is already a business, and you have just a short time, usually a few months, to quickly grow it. However, much like an incubator, there is access to office space, technology and community, as well as mentor networks and investor groups. What an accelerator looks for in return for helping your business quickly move forward and get exposure to key people that can take it further, is a share in your company’s return.

Seed Capital

Seed capital, also sometimes called seed funding, is the initial capital used to develop a new business idea. Funders of seed capital are usually family and friends who believe in you, first and foremost, and your ideas and business goals. Seed capital is usually an insignificant amount of money, but enough to cover initial operating costs until your product or service begins generating its own revenue. If your business succeeds, the round of funding that follows the seed round is series A funding, sometimes funding by wealthy angel investors which amounts to a larger amount of capital. Following is series AA funding, funding by wealthy individuals or investor groups, series B funding, series C, etc. Additional rounds of funding, of course, depend on the continued success and scale of your startup.

Venture Capitalist

A venture capitalist is wealthy investor who invests in early stage startups and small business that want to grow, but don’t have access to the financial resources to do so. Venture capitalists take the risk of investing in new startups and small business because the rewards are promising in the event of the successful growth of the companies they invest in. Equity in the company is what venture capitalists look for

Co-working

Probably incubators have given rise to the popular co-working spaces sprouting up everywhere. Similar to both incubators and accelerators, they provide both startups, small businesses and freelancers office space to work, conference/meeting rooms to meet with staff and clients, technology and even coffee and pastries for a monthly fee. Co-working has helped give an image to the millennial startup life and startup culture.