VCs have a jargon problem and this is how to fix it

[ad_1]

Over the eight years I’ve spent in VC, I’ve witnessed the consistently challenging vocabulary the industry creates. Venture capital is an industry full of big words, from technical acronyms to lofty descriptions. This often means we need to make more sense to founders, and that’s on us to use less jargon.

Historically, VCs are viewed as exclusive and cliquey, opposite from the “founder friendliness” that all VCs strive to have. While diversity and inclusion (D&I) has rightly become more of a focus across the ecosystem in recent years, the language we use needs to be noticed and still serves as a barrier to entry for founders.

We’re all guilty of tech-speak, and it’s usually accidental rather than malicious. But I believe it’s one of the biggest blockers to making our industry more accessible. While the misuse of jargon can keep outsiders out, it also plagues the inside of VC firms. A reliance on jargon also shows a lack of understanding and communication skills for VCs. High-performing investment teams will minimize their use of jargon and say what they mean to cut to the core of a founder and a business’s strengths and weaknesses.

It’s in everyone’s interests to upskill plain speaking. Being able to communicate ideas clearly and concisely is a core skill in any industry, but it’s one that VCs will struggle to foster in founders if they don’t lead by example.

Efficient jargon

Not all jargon is bad. When using it, ensure it’s used for the right reasons. It can be efficient. But at its worst, it can be a way that insiders keep outsiders at bay and perpetuate the VC industry’s elitist reputation.

High-performing investment teams will minimize their use of jargon and say what they mean to cut to the core of a founder and a business’s strengths and weaknesses.

I see two types of jargon in the industry — efficient jargon and lazy jargon. “Efficient jargon” conveys common and crucial concepts that remove cumbersome repetition. These are often acronyms, like saying NDR instead of “net dollar retention.” Although these terms are effective in conveying ideas, they still place the burden on the listener to unpack the term.

For example, one wildly confusing yet completely fundamental metric is “ARR.” ARR can have two definitions, and it’s infrequent to hear anyone elaborate on which one they’re referring to:

  • ARR — annual recurring revenue: The total contract value/number of years. This usage is the more accurate, original sense of ARR.
  • ARR — annualized run rate: The monthly recurring revenue multiplied by 12. This metric is more commonly referred to nowadays but should only be relied on when a company has net negative churn.
  • ARR — annual reoccurring revenue: This is an attempt to use jargon to make something that isn’t ARR seem like ARR.

ChartMogul has done a helpful breakdown of ARR in all its forms, which I would direct founders toward. However, communicating their original intent is more important than translating these terms. When a founder cuts through that jargon and clearly labels how they define “ARR,” it shows they have a fundamental understanding of what they are measuring and why it is essential. Sometimes, that is as simple as a statement: “We define ARR as monthly recurring revenue x 12.”

[ad_2]

Source link

Leave a Reply