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Quizzes > Quizzes for Business > Business

Test Your Startup Terminology Quiz Skills

Master Startup Vocabulary Through Fun Questions

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting various startup terms for an engaging trivia quiz.

Ready to test your startup terminology skills? This engaging startup terminology quiz is perfect for entrepreneurs, students, and business enthusiasts eager to master essential lingo. In just 15 interactive questions, you'll deepen your understanding of venture capital and growth-stage vocabulary. Explore related Startup Finance and Venture Capital Knowledge Quiz or challenge yourself with a Digital Marketing Terminology Quiz for broader industry insights. All quizzes are editable in our quizzes editor for personalized learning experiences.

What does the startup term "MVP" stand for?
Market Validation Process
Most Valuable Proposal
Minimally Viable Product
Maximum Value Production
MVP stands for Minimally Viable Product, which is the simplest version of a product that allows a team to collect the maximum amount of validated learning about customers. It focuses on core features only. This approach helps startups test assumptions quickly and efficiently.
What is a startup's runway?
The list of potential investors
The time a startup can operate before funds run out
An office space allocated for the team
A marketing launch plan
Runway refers to the amount of time a startup can continue operating before it runs out of cash, given its current burn rate. It's calculated by dividing available cash by monthly expenses. Knowing runway helps founders plan funding and growth milestones.
Which funding stage is typically called "seed funding"?
A company's annual marketing budget
A government grant for startups
Revenue generated from first customers
The first institutional capital raised to finance early development
Seed funding is the earliest round of institutional capital that helps startups finance product development and initial market research. It often comes from angel investors or seed funds. This stage precedes larger rounds like Series A.
Equity in a startup refers to:
An employee's salary
Ownership stakes in the company
The total sales revenue
The company's debt obligations
Equity represents ownership shares in a startup, giving holders a claim on assets and profits. Founders, investors, and employees with options hold equity. It is distinct from debt, which requires repayment.
Who is an angel investor?
A crowdfunding platform user
A bank that offers business lines of credit
A high-net-worth individual who provides early capital
A government agency that grants loans
An angel investor is typically a wealthy individual who invests personal funds into startups at early stages. They often provide mentorship and networking support as well. This differs from institutional venture capital firms.
What does it mean when a startup "pivots"?
It expands internationally overnight
It changes its business model based on feedback
It raises a larger funding round
It hires a new CEO
A pivot occurs when a startup shifts its business model or product direction in response to market feedback or poor initial performance. It's a strategic change aimed at finding a more viable path to success. Pivots help optimize product-market fit.
Which scenario exemplifies "bootstrapping"?
Raising venture capital
A founder using personal savings to fund the company
Selling company shares on public markets
Securing a bank loan
Bootstrapping means funding a startup using personal funds or internal revenue rather than external investors. It emphasizes lean operations and controlled growth. Bootstrapped startups retain full ownership but grow more slowly.
What differentiates Series A funding from Series B?
Series A only involves debt financing, Series B equity
Series A focuses on scaling product-market fit, Series B on market expansion
Series A is offered by angel investors, Series B by family offices
Series A is for initial idea, Series B is for prototype creation
Series A rounds are typically aimed at optimizing the product and scaling the business model after initial traction. Series B rounds focus on expanding market reach and operations. Each stage has different valuation and investor expectations.
What is a cap table (capitalization table)?
A comparison of competitor company capital structures
A schedule of upcoming funding rounds
A list of potential customers and markets
A document detailing a startup's ownership and equity stakes
A cap table lists all shareholders, their equity stakes, option pools, and convertible instruments. It tracks ownership dilution through funding rounds. Accurate cap tables are essential for strategic decision-making and investor relations.
In startup finance, what does "burn rate" measure?
The frequency of investor meetings
The speed of product development
The rate of user churn
The rate at which a company spends its cash reserves
Burn rate is the speed at which a startup uses up its cash reserves, usually expressed monthly. Monitoring burn rate helps founders understand runway and funding needs. A high burn rate can signal financial risk if not managed.
What defines a "unicorn" in startup terminology?
A private company valued at over $1 billion
A startup that breaks even within one year
Any company backed by a venture capital firm
A company with over one million customers
The term "unicorn" refers to privately held startups with valuations exceeding $1 billion. It highlights rare and high-growth ventures. The label underscores investor optimism and market potential.
What is a term sheet?
A marketing strategy outline
A detailed financial audit report
A legal contract transferring shares
A non-binding document outlining key investment terms
A term sheet summarizes major terms and conditions of a proposed investment but is non-binding except for certain clauses. It covers valuation, governance, and liquidation preferences. Negotiating the term sheet precedes definitive legal agreements.
What does "dilution" refer to in venture financing?
Paying off early investors at a premium
Reduction in ownership percentage due to new shares issued
A decrease in product quality under scaling
Spreading revenue thin across departments
Dilution happens when a company issues additional shares, reducing existing shareholders' ownership percentages. It's a trade-off for raising new capital. Founders and early investors must consider dilution impact in funding decisions.
Which principle is central to the Lean Startup methodology?
Hiring extensively before product-market fit
Maximizing shareholder dividends from day one
Building, measuring, learning in iterative cycles
Delaying product launch until perfection
The Lean Startup methodology is based on iterative cycles of build-measure-learn to quickly validate assumptions and minimize wasted effort. It emphasizes early customer feedback. This approach accelerates product-market fit discovery.
What best describes an exit strategy for a startup?
A marketing plan to exit beta testing
A plan for founders or investors to realize returns, such as IPO or acquisition
A strategy to exit the market when competition heats up
A method to close unprofitable departments internally
An exit strategy outlines how founders and investors will convert equity into cash, typically via an acquisition, IPO, or buyout. It aligns long-term goals and influences funding decisions. Planning exits early can affect company structure and growth.
What does a 1x liquidation preference mean for investors?
Investors get one share for each share held after liquidation
Investors receive back their original investment before other shareholders
Investors can veto any acquisition offer
Investors receive 1% of proceeds regardless of investment size
A 1x liquidation preference ensures that investors are paid their original investment amount before any proceeds are distributed to common shareholders. It protects investors' downside in an exit event. Only after satisfying this preference do remaining funds go to founders and employees.
In venture capital, what is a "full ratchet" anti-dilution mechanism?
Adjusting investor share price to lowest subsequent round price, protecting them fully
Gradually reducing investor ownership over time
A process to ratchet up board seat allocations
A method to repay debt before equity
A full ratchet anti-dilution provision adjusts the price per share for earlier investors to the lowest price of any subsequent funding round, fully protecting them from down rounds. It can significantly dilute founders. It's more aggressive than weighted average adjustments.
If an investor puts $5 million into a startup at a $20 million pre-money valuation, what is the post-money valuation?
$100 million
$20 million
$25 million
$5 million
Post-money valuation equals pre-money valuation plus new investment. Here, $20 million pre-money plus $5 million new capital yields a $25 million post-money valuation. This figure determines the investor's ownership percentage.
What are pro rata rights in a funding context?
The right for existing investors to maintain their ownership percentage in future rounds
Mandatory distribution of profits proportional to shares
Government-imposed taxes on investment rounds
A requirement to convert debt into equity
Pro rata rights allow existing investors to participate in subsequent funding rounds in proportion to their current ownership, preventing dilution. This ensures they can maintain their stake percentage as the company raises more capital. It's a common protective provision.
What is a SAFE (Simple Agreement for Future Equity) instrument?
A grant that does not require equity
A type of secured loan with fixed repayment
An agreement where an investor provides capital in exchange for future equity when a trigger event occurs
A bond issued by startups to raise debt capital
A SAFE is a financing contract where investors provide funds today in exchange for the future issuance of equity upon a specific trigger event, such as a priced round. SAFEs simplify early-stage investment by deferring valuation negotiations. They are not debt and have no maturity date.
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Learning Outcomes

  1. Identify common startup terms and definitions
  2. Apply industry vocabulary in real-world scenarios
  3. Analyze startup jargon within business contexts
  4. Evaluate key venture capital terms usage
  5. Demonstrate understanding of startup growth stages

Cheat Sheet

  1. Understand Pre-Money and Post-Money Valuation - Dive into the magic math that tells you how much a startup is worth before and after fresh funding. For instance, a $10 M injection into a $50 M pre-money company creates a $60 M post-money valuation, shaping who owns which slice of the success pie. Pre-Money Valuation
    2. en.wikipedia.org
  2. Grasp the Significance of Series A Funding - Think of Series A as the first big leap off the ground for a startup, where they turbocharge growth and polish their product. Nailing this round means you've convinced investors that scaling up is worth their cash. Series A Round
    3. en.wikipedia.org
  3. Familiarize Yourself with Convertible Notes - These nifty instruments start as loans and metamorphose into equity later, letting startups postpone tricky valuation talks until they're more established. Imagine a note that flips into shares during Series A - voilà, less paperwork drama! Convertible Notes Guide
    4. netsuite.com
  4. Comprehend Liquidation Preferences - Picture a queue at a theme park ride: liquidation preferences decide who gets paid first when a company's assets are sold off. A 2× preference means that investor jumps to the front of the line to get twice their money back before anyone else. Liquidation Preference
    5. en.wikipedia.org
  5. Recognize the Role of Angel Investors - Angel investors are the fairy godparents of the startup world, sprinkling early capital in exchange for equity or convertible debt. Understanding their motivations and dreams helps you craft pitches that feel like irresistible invitations. Angel Investor
    6. en.wikipedia.org
  6. Learn About Corporate Venture Capital (CVC) - When big companies play startup hunter, they invest strategically to tap into fresh tech or new markets. Imagine a tech juggernaut backing an AI upstart to stay ahead of the innovation curve. Corporate Venture Capital
    7. en.wikipedia.org
  7. Understand the Importance of a Cap Table - A cap table is like the family tree of who owns what in a startup - from founders and investors to option holders. Keeping it squeaky clean ensures everyone knows their stake and avoids nasty surprises during funding rounds. Cap Table Glossary
    8. esinli.com
  8. Know the Concept of Burn Rate and Runway - Burn rate measures how fast a startup spends its cash, while runway tells you how long you can keep flying before refueling. If you burn $50 K a month with $200 K in the tank, you've got just four months of runway - time to find more fuel! Burn Rate & Runway
    9. venturecapital.com
  9. Differentiate Between Up Rounds and Down Rounds - Up rounds are high-fives all around: raising funds at a higher valuation signals growth and investor confidence. Down rounds, by contrast, are a sobering reminder that valuations can dip, so it's key to understand how each affects founders and shareholders. Valuation Rounds Explained
    10. esinli.com
  10. Master the Elevator Pitch - Craft a lightning-fast summary of your startup's superpowers, target market, and secret sauce that can win over investors in under a minute. Nail this skill, and every conversation - on an elevator, at a café, or online - becomes an opportunity. Elevator Pitch Tips
    11. venturecapital.com
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