Your Full Guide to Understand Entrepreneurship Terms

Over the last several decades, startups and entrepreneurs have gained a significant role in economic growth all around the world, which is understandable by how they help enrich business environments with new innovative projects, many of which end up becoming prominent business companies.

This increasing importance of start-ups is pushing more and more people to learn about the entrepreneurship world and the terms used to discuss the different steps and phases a project goes through before and amid achieving success.

In some instances, terms can be confusing and entangled that it is hard for people to use the right words at the right time, which makes it exceptionally important for people to not only understand the various terms in this world but also be able to tell the difference between them. 

Startups are often connected to a great deal of risk-taking, as entrepreneurs decide to create a new form of business activity, hoping to draw investors' interest and make a profit.

In this article, we will explore a number of the most used words often used in the conversation over startups development and business growth;

1. Incubator

Getting involved in the entrepreneurship world, the word Incubator will be heard quite often, in reference to an external entity with interest and excitement for an idea that an entrepreneur has, so it offers help in terms of building the business model, designing the different plans needed for the project once it is launched, in addition to guiding the new businesspeople into finding resources and achieving success.

In the Middle East, there is a number of well-known incubators that have helped promising projects over the years, such as Jordan's Oasis500, Lebanon's Agrytech Hackathon, and the UAE's Astrolabs and In5.

2. Accelerator

This term is closely related to the previous one that people often use them interchangeably. The reason behind this is that both an incubator and an accelerator tend to lend emerging businesses a hand during the first few stages of their work.

However, while an incubator works on an idea that has NOT yet been presented to the world as a project, an accelerator provides help to a fledging startup that needs a boost in order for it to achieve growth after it has been established.

3. Acquisition

When a business is being acquired by another one, its ownership gets taken over by a larger, well-established business that can help support its growth efforts. 

For example, a 2019 acquisition deal worth $3.1 billion resulted in Uber taking over the Middle East's car-hailing app Careem.

4. Merger

Similar to an acquisition, a merger is a process through which two businesses join efforts to create one large organization with the same plans and goals.

Mergers often happen between businesses that hope to expand their activities, reach larger target audiences, and make more profit.

5. Outsourcing

Because startups usually find their business activities short on money, they set extreme cost-cutting strategies to ensure using their available sources for the activities they hope to make a profit through.

This is why they often end up hiring third-party entities to finish a number of tasks that can not hire employees for in fixed terms, such as IT support, accounting, delivery and other services. This practice is called outsourcing.

6. Crowdfunding

This is a financing strategy on which most startups are based, often taken by entrepreneurs who do not wish to have other entities control their decisions.

Typically, a startup will set a funding event that can be virtual in some cases, asking a large number of people to each contribute a little bit of money for the project, after hearing about it and learning about its objectives. Examples of successful crowdfunding platforms in MENA include ZOOMAL, EUREECA and YUMKEN. 

7. Venture capital

This is another way of financing a startup, when an enterprise starts to show signs of long-term success, investors interested in supporting the project in exchange for profit would consider providing financial aid in the form of venture capital.

In some cases, investors or venture capital firms gain the right to take part in major decisions taken by the entrepreneurs, to ensure achieving success.

Usually, the more potential of success a business can demonstrate, the more interested investors become in trusting it with their money.

8. Series A, B, and C

When a project achieves its first funding opportunity, one that is often meant to support salaries, market research, in addition to finalizing the product or services provided by the startup, it is called Series A funding.

This is considered the riskiest type of funding because it often requires an investor to believe in a business idea that has yet to show signs of success.

Series B is the second round of major funding received by a project, which can reach up to $30 million.

Finally, Series C is the largest round of financing a startup, which often happens in later stages of success to well-established businesses that have the potential to grow even more.

9. SME

Also known as Small and Medium-Sized Enterprise is a term that refers to a business with less than 250 individuals involved. Such businesses usually have the potential to achieve more success once it overcomes a number of challenges, such as funding.

10. KPI

Also known as Key Performance Indicators, which is a set of quantitative measures determined by stakeholders in order for them to assess the success of a business. 

What other entrepreneurship terms do you wish to learn about? Why is it important for you to learn about terms used in the conversation over start-ups building?