Terminologies

Having a shared language and common understanding behind the various concepts related to entrepreneurial ecosystems is critical to collaboration – and collaboration is critical to further grow an entrepreneurial ecosystem. Below, we are introducing a list of the most common terms that hopefully help standardize the terminology and contribute to a better understanding.

Accelerator

Time-limited, cohort-based programs that typically include a curriculum of shared information and a set of different services (e.g. training, mentorship, access to funding). In developed markets, an emphasis is often placed on connecting startups with investments at the end of the program. In advanced ecosystems, accelerators often are specialized around a sector, which can be an industry, technology or customer type.

 

Angel investor

An individual who provides funding for a startup at the earliest stages of development, when the risks of business failure are highest and when most other investors are not prepared to provide funding. Angel investors may invest together in a syndicate. 

 

Cohort

A group of people selected to follow a defined course of study together.

 

Convertible debt

Debt which, under certain circumstances, converts into equity shares in a company.

 

Corporate social responsibility (CSR)

Efforts by corporations to contribute to the realization of societal goals through philanthropic, activist or charitable efforts or funding.

 

Co-working space

A co-working space is typically occupied by different independent professionals who come together in one location to share amenities that are normally present in an individual office environment.

 

Co-working spaces have various benefits for entrepreneurs, e.g. they are more flexible and cost-effective. They also enable users to gain more knowledge by engaging in a dialogue with other entrepreneurs, with the resulting insights being used to improve their own business and drive their personal development.

 

Debt

A monetary obligation to repay an amount, typically money, to another person or organization.

 

Due diligence

A comprehensive evaluation of a business undertaken by a prospective investor to identify key risks that need to be mitigated or to determine the value of a business.

 

Economically viable

The state of being able to continue operating as a business without receiving grants or subsidies by successfully selling products or services or attracting investment in the form of equity or debt.

 

Employee shares

Ownership stakes in a company that is owned by the employees of a company.

 

Entrepreneur

Anyone who owns, co-owns or is in the process of developing a business in any sector with an ambition to further grow his/her company.

 

Entrepreneurial ecosystem

A network of interconnected entrepreneurial players, organizations (e.g. firms, service providers, venture capitalists, business angels or banks), institutions (e.g. universities, public sector agencies), and policies aiming to create, support connect or scale new ventures.

 

Entrepreneurial support organization (ESO)

Organizations that are designed exclusively to stimulate entrepreneurship, including organizations such as accelerators, incubators and co-working spaces.

  

Equity

An ownership stake in a company that takes the form of shares in that company.

 

Founders’ equity

An ownership stake in a company held by its founders or founding team.

 

Grant

A sum of money awarded by an organization seeking to achieve social objectives without the recipient being under any obligation to repay the capital or to surrender ownership stakes to the party providing the grant.

 

High-growth enterprises

Firms whose exceptional growth makes the largest contribution to net job creation, despite them typically representing a small proportion of the business population.

 

Incubator

An organization that provides a range of resources for startups and lifestyle businesses. They can range from office space and events to training courses, mentoring or access to business support networks. The goal of a business incubator is to help companies grow and succeed. In contrast to accelerator programs, an incubator does not usually run cohorts, and businesses often pay membership fees to access the services being offered.

 

In Kigali, the terms “incubator” and “accelerator” are often used interchangeably, and the

two often have similar goals and structures.

 

Initial public offering (IPO)

The first time a company’s equity or shares are offered for purchase on an exchange such as the New York Stock Exchange, NASDAQ or the Rwanda Stock Exchange.

 

Innovation method

The action or process of creating or introducing something new – such as  a product, service or method.

 

Intellectual property

Tangible ideas created by people that are intended to be protected against imitation, such as copyright, patents, trademarks or trade secrets.

 

International donors

International development agencies, development partners or foundations that provide funding to achieve self-defined social outcomes according to self-defined key performance indicators (KPIs).

 

Key performance indicators (KPIs)

A set of quantifiable measurements used to evaluate the performance of a program, organization or individual towards achieving a goal or set of goals.

 

Lifestyle business

These are more traditional or family-run companies with an incremental growth trajectory. They
are typically financed internally (using their own revenues) or via traditional financial institutions
(e.g. microfinance institutions or banks).

 

Maker space

A collaborative working environment, often linked to or located inside a university or public/private facility for making, learning, exploring and sharing. These spaces are often equipped with a range of maker equipment, including but not limited to 3D printers, laser cutters, CNC machines, soldering irons or even sewing machines.

 

Market share

The portion of a market controlled by a particular company or product.

 

Market traction

Objective evidence that a business is making progress towards its goals, typically in terms of the take-up of a product or service by customers.

 

Mentor

An experienced professional who can provide advice, knowledge or connections to individuals or entities within her/his network. Mentors usually have strong business acumen and practical insights gained from their own former entrepreneurship experience or industry knowledge.

 

Minimal viable product (MVP)

A version of a product with just enough features to satisfy early customers and provide feedback for future product development.

 

Need validation

The ability to demonstrate that a product or service actually solves a customer need and that potential customers are willing to pay for it.

 

Peer-to-peer learning

Interaction with other entrepreneurs to share experience and knowledge in order to learn and grow from each other without being paid.

 

Pilot

A small-scale preliminary study or experiment conducted in order to evaluate feasibility and impact prior to devoting additional time and funding to a project or initiative.

 

Pitch deck

A brief presentation to provide an audience with an overview of a business, its prospects and its development plan, typically focusing on introducing the business to investors or other partners.

 

Product validation

Also known as product-market fit, this is where a company proves that its product or service and its value proposition resonate with the target group and that it has been able to expand its market beyond early adopters.

 

Prototype

An initial sample or model of a product to test the concept with customers or other stakeholders.

 

Proof of concept

A technical exercise or a small internal project that identifies whether a specific idea has real potential and can be realized in practice.

 

Revenue-based financing

A capital-raising method where investors receive a percentage of the company’s ongoing revenues in exchange for providing capital. This is an alternative model to equity or debt financing.

 

Scalable

The ability of a business to multiply revenue with little incremental cost. A business is ready to scale when it has a proven product and business model and is about to break into new territories and markets. 

 

Seed funding

The first external funding secured by a company, typically in the form of equity or a convertible note from angel investors. Sometimes also referred to as early-stage financing.

 

Service provider (SP)

A business that provides organizations with a service in return for a fee (e.g. consulting, legal, tax or marketing services). They may have special services targeted at entrepreneurs, which are available at more flexible prices but they usually also work with more established companies.

 

Social business

Companies with an innovative business model that prioritize social, environmental or artistic goals over the generation of significant growth.

 

Startup business (startup)

Companies looking for scalable business models that allow for exponential growth. They actively seek for angel investors and venture capital, typically with high-touch programs.

 

Subsistence entrepreneurs

Individuals or families engaging in income-generating activities by necessity, with limited or no ability to grow. They generate income mostly for own consumption and survival and thus have little motivation to formalize their business.

 

Term sheet

A non-binding agreement setting out the basic terms and conditions under which an investment will be made.

 

Value proposition

A tangible summary of a product, service or offering specific to the recipient and how it differentiates the company from the rest of the industry.

 

Venture capitalist

A type of professional investment organization that invests from an organized fund, known as a venture capital fund, in startups in order to earn a high return on investment.

 

Venture debt

A type of financing that is made available to companies that already have the backing of a venture capital firm. It is designed to help startups and emerging companies to access additional funding without further equity dilution.