Challenge Cup
Moneyballing and 7 Other Strange Terms You Will Hear at a Startup Pitch Competition
Free Enterprise Staff | November 18, 2013

Having now attended a few of the Challenge Cup startup pitch competitions, one thing is clear: startups have their own language.

Sure, you’ve probably heard of angel investors, but do you know about super angels? You think you know what traction is when it comes to getting your car up an icy hill, but what about a startup with traction? And MVP definitely doesn’t mean Most Valuable Player when it comes to the tech world.

So put away your dusty dictionary, brush off your elevator pitch, and get ready to disrupt the English language with these common startup terms. Whatever you do, don’t eat your own dogfood until you’ve got all these down pat.

Disruptive – According to Forbes: “A disruptive start-up shakes up a market by doing something different. It could be lower prices, better value or a more convenient service. Being disruptive doesn’t necessarily mean doing something radically new or different. It could be doing something in a way that slightly goes against the grain or addresses a point of pain in a different way.” Its somewhat vague definition makes it a popular term among the startup crowd. Who’s going to argue that your technology has not disrupted the status quo?

Scalable startup – A startup aiming for major growth, both in terms of revenues and impact, all at very little cost. Forbes defines it as: “Simply stated, it means that your business has the potential to multiply revenue with minimal incremental cost.” Or, as Atelier Advisors’ Lili Balfour put it in the Wall Street Journal: “A scalable startup has inherent qualities that promote infinite growth. The ability to serve one million users flows from the infrastructure that efficiently serves 10.” Facebook is the quintessential example of a scalable startup.

Traction – Evidence of long-term, sustainable growth, usually a massive adoption of a startup product by users, and generally at least 10,000 users. That is roughly the point at which the startup has shown it can repeatedly acquire customers, and therefore, becomes interesting to investors. Some great traction moments in history? Foursquare launched at SXSW, adding 4,000 users in that month while adding new cities. Mint founder Noah Kagan built up a mailing list of 20,000 email addresses before launching his money-management website and app. AirBnB grew by responding to rental properties listers on CraigsList and offering them a chance to list on AirBnB as well.

MVP (minimum viable product) —A product with just the necessary features to get money and feedback from early adopters. For example, Zappos used what’s referred to as a “Wizard of OZ” MVP – founder Nick Swinmurn put up an MVP site featuring photos of real shoes from nearby shoe stores. When the orders came in, he went out, bought the shoes, and shipped them. Thus, Swinmurn established that there was indeed a demand for online shoe shopping, without having to go out and buy tons of inventory.

PayPal Mafia – A group of former PayPal employees and founders who have since founded and developed additional technology companies, including Tesla Motors, YouTube, and LinkedIn. The term now applies to other successful founders who have stayed busy in the startup world. London says it is on the cusp of spawning its own PayPal Mafia. Paris has Exalead, a semantic search startup founded in 2000 which sold for $162 million in 2010, money the company founders are shoveling back into new startups. Montreal (always looking to up their street cred) also says it has a new mafia in town, headed by Austin Hill, a serial entrepreneur and co-founder of the city’s first Internet Service provider Total.Net.

Moneyballing – No, not a movie with Brad Pitt. Rather, it’s an investing term. Instead of relying on a meeting and a pitch, some senture capital firms use statistics, data, and algorithms to decide whether to invest in a startup. Venture capital firms including Google Ventures, Kleiner Perkins Caufield & Byers, Sequoia Capital, Y Combinator, and Ironstone are all known to use this type of analysis in deciding where and with whom to invest.

Super-angels – (see also: “micro-VCs” or “super-seed” investors.) These are a group of aggressive startup investors that operate like a cross between venture capitalists and angels – they invest early and in small amounts, on average from $250,000 to $500,000. “By being smaller, faster, and less demanding of entrepreneurs than VCs, super angels are getting first dibs on the best new ideas,” notes Fast Company. “Super angels give startups much less money than VCs, but they expect a lot less in return. Typically, they don’t take a seat on the startup’s board; they take a small stake in the firm and hand over their funds in weeks rather than months.” Mint, Digg, and Ustream are three prominent super-angel-funded companies.

Syndicates – This is a fairly new investing term in which a group of small-scale angel investors pool their resources behind a larger leader who’s investing in startups. AngelList recently launched its’ AngelList Syndicates section to connect these small and large investors. The syndicate lead collects 15% of any profits (with an additional 5% going to AngelList), with the remaining investors keeping the additional upside. Unlike traditional venture capital funds, there are no fees paid before an investment is successful.