MGMT 159 FINAL EXAM VOCAB

Bootstrapping

Funding a company through founder savings and revenue rather than
outside investment. Founders keep full ownership but grow only as fast as
the business can pay for itself.

SBA Loan

loan partially guaranteed by the U.S. Small Business Administration,
issued through commercial lenders. Lower rates than typical commercial
debt, but requires a personal guarantee and collateral. Founders keep full
ownership.

Reward Crowdfunding

Pre-selling a product to backers via platforms like Kickstarter or Indiegogo.
Backers get the product or perks, not equity. Useful for tangible consumer
products with passionate niche audiences.

Equity Crowdfunding

Raising capital from many small investors (often via Reg CF) in exchange
for equity. Affinity-based versions raise from alumni networks,
identity-based groups, or regional communities.

Government Grants

Non-dilutive funding from agencies like DARPA, SBIR, NIH, or DOE. No
equity given up, but slow application cycles and tight mission alignment
with the funder's priorities.

Angel Investor

A wealthy individual writing an early check into a startup, usually before
institutional venture capital. Typically accredited investors deploying
personal capital.

Angel Syndicate

A group of accredited individual investors pooling capital to invest together
in early-stage companies. Tech Coast Angels (TCA) is one of the largest in
the U.S.

Accredited Investor

An individual or entity that meets SEC income or net-worth thresholds,
allowing them to invest in private placements not registered with the SEC.

Dilutive vs. Non-Dilutive Capital

Dilutive capital (equity) gives investors ownership in exchange for money —
your percentage shrinks. Non-dilutive capital (grants, revenue, certain debt)
does not change ownership

Patient Capital

Investment willing to wait many years for returns, typically because the
technology, market, or product needs a long development arc. Most VC is
not patient capital.

Personal Guarentee

A founder's promise to repay a business loan from personal assets if the
business cannot. Standard on SBA loans and most small business debt.

Cap Table

Short for capitalization table. The spreadsheet that tracks who owns what
percentage of the company at any given moment.

Pre-Money vs. Post-Money Evaluation

Pre-money is what a company is worth right before new investment.
Post-money is what it's worth right after. Pre-money plus the new money
equals post-money.

Term Sheet

The non-binding document that lays out the major terms of a proposed investment (valuation, ownership, board seats) before lawyers draft final
paperwork.

Board Observer Rights

An investor's right to attend board meetings without voting. Common in
angel and seed deals as a lighter alternative to a full board seat

Follow-on Investment

Additional capital from the same investor in later rounds. Angels often
expect to follow on, and reserves for follow-ons are part of how syndicates
operate.

DARPA / SBIR

Defense Advanced Research Projects Agency, which funds high-risk defense R&D. SBIR (Small Business Innovation Research) is a
federal program awarding non-dilutive grants to small businesses for
early-stage R&D.

Burn Rate / Runway

how much cash a company spends per month beyond what it brings in. Runway is how many months of cash remain at the current burn
rate.

Founder-Market Fit

the idea that some founders are particularly well-suited to the market
they're building in, because of background, expertise, or insight others
don't have

Supply Chain

everything it takes to get a product from raw materials to the customer: sourcing, manufacturing, packaging, warehousing, shipping

Raw Materials

the inputs you start with

(ex. flour, plant protein)

Work in Progress (WIP)

Product in progress, but not finished.

Finished Goods

done, boxed, and ready to ship.

Co-Packer/Co-manufacturer

A third-party factory that makes your product for you. Most early-stage CPG
brands use co-mans rather than building their own factorie

Production Capacity

How much a facility can make in a given period. When a facility is at 100%
capacity, you can't grow without adding another one.

Lead Time

How long it takes from when you order something to when it arrives. Long lead
times = you have to plan further ahead.

Capital Expenditure (CapEx)

Money spent on long-term physical assets — equipment, facilities, machinery.
Different from regular operating costs because you get value from it for years

Gross Margin

What's left from each sale after you subtract what it cost to make and deliver the
product. Expressed as a %. A 40% gross margin on a $5 donut box means $2
covers everything that isn't manufacturing/shipping.

Working Capital

The cash you need on hand to run the business day-to-day — pay suppliers, hold
inventory, wait for retailers to pay you.

Carrying Cost

The cost of holding inventory you haven't sold yet (storage, refrigeration,
insurance, money tied up in stock).

Refridgerated/Cold Chain

the supply chain where the product has to stay cold from production through to
the store shelf. Adds complexity and cost.

Differentiation

What makes your product distinct from competitors in a way customers care
about.

Cap Table

A spreadsheet that lists who owns what percentage of the company. Lawyers maintain this.

C-Corp

The default legal entity for startups raising venture capital. (Delaware C-corp specifically).

LLC

A simpler legal entity, often used by small businesses and solo founders. Not preferred by VCs.

Equity

Ownership in the company, usually in the form of shares of stock.

Stock Options

The right to buy company shares at a fixed price later. How startups pay employees when they can't afford salaries.

Vesting

The schedule on which equity becomes "yours." Standard is 4 years with a
1-year cliff.

Cliff

The minimum time you have to stay before any equity vests. If you leave before
the cliff, you get nothing.

Term Sheet

A short document (3-8 pages) outlining the key economic and control terms of
an investment, before the long legal docs are drafted.

Due Diligence

the investigation an investor or acquirer does into your company before
writing a check. Lawyers, accountants, and bankers run different pieces of this.

D&O Insurance

Directors & Officers insurance. Protects board members and executives from
being personally sued.

Retainer

A monthly fee paid to a professional (often a lawyer or PR firm) to keep them on call.

Billable Hour

How most law firms charge — by every hour worked, often $400–$1,500+ per hour for a partner like Sarah.

General Counsel (GC)

An in-house lawyer the company employs full-time. Usually hired only at later
stages.

Company Formation

setting up the entity (C-Corp, LLC, etc.), drafting founder agreements, etc.

Fundraising by a Lawyer like Sara

papering venture rounds (Series Seed, A, B, C…), negotiating with investors,
handling SAFEs and convertible notes

M&A (mergers and acquisitions)

selling the company, or buying other companies

Joint ventures and Partnerships

structuring deals between companies

General corporate “Hygiene” done by a lawyer like Sara

Contracts, board meetings, stock option plans, employee equity,
regulatory compliance

Economics

Incentives of supply and demand. Scarcity, management of resources.

• sell-side player’s incentive: individual, based on the seller (can be to maximize money, escape risk, etc.)

• buy-side player’s incentive: individual, based on the buyer.

AI Agent

Software that can understand what a person wants, make decisions, and
take action on their behalf — without the person doing every step
themselves. Think of it like a very capable assistant that can browse,
compare, book, and buy for you.

Agentic AI

I systems designed to operate autonomously across multiple steps —
not just answer a question, but complete a task.

Customer Agent

An AI working on behalf of a customer — doing the searching,
comparing, and buying that the customer used to do manually

Product Cycle compression

The shortening of the time it takes to go from idea → design → built
product → shipped to users. What used to take a year might now take
weeks.

Digital Touchpoint

Any moment where a customer interacts with a company digitally — an
app, a website, an email, a chatbot.

Business Engine

The core systems underneath a business — data, pricing, customer
records, policies, payments. The stuff that actually makes the company
run, separate from the visual "wrapper" customers see.

Headless Business

The business that separates its core engine from any single interface, so its
data and services can be accessed by websites, apps, agents, or
channels that don't even exist yet.

Closed-Source Model

An AI model (like certain versions of ChatGPT or Claude) that a company
builds, owns, and charges for access to. You're dependent on their pricing
and availability.

Open-Source Model

An AI model whose underlying code is publicly available. Companies can
run it themselves instead of paying a closed-source provider.

Unit Economics

The financial math at the level of a single unit — one customer, one
product, one transaction. Does this thing make money on its own, before
you add up the big numbers?

Universal Basic Income (UBI)

A policy idea where the government gives every citizen a regular cash
payment, regardless of whether they work. Proponents argue it could be
needed if AI displaces enough jobs.

Why Incorporate in Delaware?

Predictable corporate law, Court of Chancery, and investor familiarity. The company can operate elsewhere while being incorporated in Delaware.

Matching Capital to Need Methodology:

What kind of money fits the business, timing, risk, and return profile?

Don’t ask: “Can we raise?”

When to choose Bootstrapping?

Founder savings and early revenue. Best when the first

test is cheap and control matters more than speed. Often

the cheapest first money.

When to choose Rewards Crowdfunding?

Customers pre-order a product or perk. Best for physical products, hardware, games, and proof of demand. No dilution, but fulfillment risk.

When to choose Equity Crowdfunding for financing?

• Small investors buy actual shares through Regulation Crowdfunding

platforms (where small businesses can raise up to $5mil from investors)

• Useful for mission/community brands, but adds reporting and cap-table complexity.

Why choose SBA/bank loans for financing?

Debt for businesses with predictable cash flow or collateral. Keeps ownership intact but creates repayment and personal-guarantee risk.

Why choose Angel Groups for financing?

Wealthy individuals investing together. Operator-oriented diligence, slower than VC, faster than banks, often relationship-driven and local.

Why choose Institutional VCs as financing?

Funds backed by (Limited Partners) such as pensions, endowments, sovereign wealth funds, and family offices. Needs huge outcomes and fund-returner potential,

Government Grants

SBIR/STTR and agency grants/contracts are non-dilutive. Best for deep tech, biotech, defense, energy, aerospace, and long Research & Develop (R&D) timelines.

Corporate/Strategic VC

Money from a large company with strategic interest. Can

bring customers, data, distribution, or infrastructure —

but rights can scare other VCs (Right to First Refusal).

Startup

A temporary organization searching for a repeatable, scalable business model. It either finds the model and becomes a company, or dies.

Small Business vs. Startup

Small business optimizes for profit and stability. Startup optimizes for scale, growth, and eventual exit, usually over 7–10+ years.

Sole Proprietorship

No paperwork: you and the business are the same. Easy for freelancers/side hustles, but no liability protection

LLC

Separate legal entity; good for many small businesses, real estate, and consulting. Harder for venture capital because it cannot issue VC-style stock.

C-Corporation

Separate legal person with shareholders. Default for companies that plan to raise VC; more paperwork and possible double taxation

Cash Equity vs. Sweat Equity

Cash can buy shares on day one; those shares usually do not vest (get 100% of shares immediately).

Sweat equity (hard work, time, effort) should vest because work is contributed over time (receive a portion of your allocated shares overtime) .

Burn Rate

How much money company loses each month

Burn Rate Runway

How much time a company has left before they have no more money and go out of business. runway = (cash)/ (monthly burn)

ex.) company has $8k in the bank, and has a $2k burnrate, company only has a 4 month runway.

Term Sheet

Non-binding document laying out investment terms.

When to Bootstrap?

Capital needs are low, revenue can come quickly, and

control matters more than speed.

When to Raise Capital?

You need lots of capital fast, profitability is years away, and whoever scales fastest wins.

Startup Lawyer

Incorporates, drafts founder equity splits, term sheets, SAFEs, notes, option plans, contracts, NDAs, and handles legal structure

Bookkeeper

Records transactions, reconciles accounts, invoices, and

pays bills. Day-to-day financial hygiene.

Accountant/CPA

Files taxes, closes books, prepares statements, handles R&D credits, tax nexus, 409A valuations, and investor-readable financials

Commercial Banker

Handles operating, savings, payroll, credit cards, venture debt, and custody. Your banker is a counterparty, not just a friend.

Investment Banker

Runs M&A auctions, IPO processes, or late-stage private raises. Usually appears when the company is selling or going public.

Board of Directors

A 3–7 person group with legal power to hire/fire the CEO, approve budgets, option grants, executive hires, and major financial events.

PR/Comms

Controls narrative: launches, fundraises, acquisitions, journalist relationships, media training, and crisis management

Recruiter

Finds candidates founders cannot find alone. Useful when time-to-hire matters more than saving placement fees.

Insurance Broker

Sets up general liability, D&O, E&O, cyber, and key-person coverage. Investors often require D&O before joining a board.

Production Capacity

How much a facility can make in a period. At 100% capacity, growth requires more capacity, new equipment, or another facility

Lead Time

Time from ordering something to receiving it. Long lead times force longer planning and larger working-capital needs.

Working Capital

Cash needed to run day-to-day: pay suppliers, hold inventory, and wait for retailers to pay you.

Carrying Cost

Cost of holding unsold inventory: storage, refrigeration, insurance, and cash tied up in stock

David Protein/EPG:

David acquired the sole supplier of a key ingredient (EPG). Smart supply-chain move, but competitors sued under antitrust/monopoly theories

Drumroll year one:

Gross margin was deeply negative while building the supply chain. Early revenue without infrastructure can accelerate losses.

Planning Capacity Early:

Capacity, equipment, real estate, and hiring require 24–36 month planning. Physical businesses cannot scale instantly.