Having a good grasp of the common language of the startup field is crucial if you want to communicate with investors and other stakeholders easily. Moreover, some startup terms are extremely useful as they serve as a mental model that helps you understand the problems and opportunities for your project better.
That said, if you don’t have any background in business it could be challenging to understand a lot of the commonly used startup jargon simply because the individual terms are often explained with references to other business terms and jargon.
So, here are some of the most important startup terms explained with analogies that a ten year old would understand.
1. Product-Market Fit
Product-market fit is when a company makes something that people want to buy. Think of it like a puzzle. The company makes a piece of the puzzle (the product or service) and the customers are the other pieces (their needs and wants). When the pieces fit together perfectly, that’s product-market fit. It’s important because if the company’s puzzle piece doesn’t fit with the customer’s pieces, they won’t buy it, and the company won’t make any money. But if the pieces fit together just right, the company will be successful.
2. Minimum Viable Product
Imagine you want to build a treehouse in your backyard, but you don’t have all the materials or tools to build the biggest and best treehouse ever. So, you start with the bare minimum, like a platform and a ladder to get up to it. This is your MVP, it’s the basic version of your treehouse.
Once you have the MVP, you can test it out and see if people like it. If they do, you can start adding more things to it, like a roof, windows, and a rope swing. This is called iterating on your MVP. It’s like adding more rooms and features to your treehouse.
MVP is important because it allows you to test your idea quickly and get feedback from people, so you can make it even better before you invest a lot of time and resources building something that might not be what people want.
Validating a startup is similar to trying out a new recipe. Consider that you want to bake a cake but are unsure if the recipe will turn out well or if other people will enjoy it. So you bake a small quantity of the cake and serve it to your friends and family. They provide you with feedback on the aspects of the cake that they liked and disliked. You modify the recipe and retest it in response to their comments.
Validation is the practice of testing and receiving feedback. It’s crucial because it enables the startup team to determine whether or not their concept will be useful to consumers and enables them to make the necessary changes before devoting a lot of time and resources to developing a full-scale product.
Imagine you want to build a big Lego house, but you don’t have all the Legos you need. So, you start by building the first room, and you get it as perfect as you can. Then, you move on to the next room, and you build that one as perfect as you can. You keep building rooms and adding on to the house, one at a time, until the whole house is complete.
This is similar to how a startup uses agile methodology for their projects. In agile, a startup breaks their big project into small chunks, called “sprints”. They work on one sprint at a time, and at the end of each sprint, they get feedback from customers and make adjustments to the project. This allows them to get their product or service to market quickly and make adjustments as they go, instead of waiting until the end to make changes.
We hope these explanations made it less daunting to enter the world of startups!
Credit: Abdo Riani is the founder and CEO of VisionX Partners, a startup development.