What is a startup? A startup is a company, either solo or partnership or corporation, designed to develop a repeatable and scalable business model. It is an organization looking to find solutions to a problem, by innovating on existing ideas to solve critical pain points. Oftentimes, the success of the solution is not guaranteed. Startups are kind of business ventures that tries to meet a specific need of a marketplace by developing a viable and scalable business model around an innovative product, process or platform.
The key ability of a startup is its ability to grow, because it is designed to scale very quickly. Usually, its growth is unconstrained by geography, but the result can either be a massive failure or success. For the startup to be successful, it needs to form partnerships with other firms.
You can definitely think of a startup as the early stage of the life of the company, where the founders usually move from the idea stage to securing financing and laying down the basic structure of the business. The idea is usually to organize a company designed for a repeatable and scalable business model.
This first stage of the business is popularly known as startup, where it is trying to conduct an investigation or research about their target market and other potential segments of the market, focused on its first phase of development. The term became popular when many dot com companies were founded and tried experimenting on scalable businesses.
The only thing that is essential and common among startups is their thirst for growth and stability. Initially, they are bank rolled or financed by venture capitalist as they attempt to develop and test the demand of a product or service.
Sometimes, its small scale operation limited revenue cannot sustain the company in the long run, hence the need for additional funding from either banks or angel investors. You see more startups offering a product or service that is not provided by the existing market, or may not be that widespread.
As they work to test and develop their product, individual entrepreneurs or some other company may sponsor them. Most of the time, they take loans from venture companies or banks. Usually, the engineering challenge is quite immense, such as creating virtual worlds, user generated content, an online commerce engine, micropayments, and a three dimensional avatar technology that can run on anyone’s PC.
Unfortunately, most internet startups eventually failed due to a major oversight and lack of a sustainable revenue. Examples of the startup companies that survived were the Amazon and the eBay. Truly, there’s a lot to learn and do to make your startup awesome.
Is the startup the same as the small business?
A startup tries to work on a solution of a problem, which success is not guaranteed. It is the thought of conceptualizing an idea, starting your own company, trying to prove the need in the market, and make the business model scalable. A startup has all intention to grow and become a big company.
The technique is usually to create an impact and influence the market using its own business model. It usually carries a business model that needs more rethinking, redevelopment, and redesign in terms of consumer behavior. It tries to see if its vision, channels of distribution, marketing scheme, and the entire business model can produce the kind of outcome it expects.
Funding of startups usually comes from the founder itself, friends, relatives, or bank. A startup is totally different from a small business. The startup capital is also referred to as the seed money.
You can compare a startup to a laboratory. It has a variety of business models by which it tries to find something that sticks and is scalable. It might try a variety of winning combinations until it finds the appropriate formula for success.
A variety of tests could be performed on a shorter scale in a smaller population sample and then, if it succeeds, test the product to a broader world. You can see how Facebook engages its market. It tries to connect family and friends who are apart and haven’t been communicating much with each other. The platform makes it possible for these people to talk and share photos or videos.
Another example is the Copyblogger. This company started as a regular blog and has continuously grown its market by sharing important information that could help improve small medium businesses as well as enhance other people’s skills. Google tried to fight spam and find a way for people to find the right information on the internet. In their initial stages, they are trying to perfect their business model, reach out their market (even unsure), and try to make money as they go.
Along the way, they stumbled on a perfect, scalable business model that not only makes perfect revenue stream but also, made them big. Once a startup finds the perfect business model, it can profit and grow tremendously.
Would you still get acquired even if you fail as a startup or not producing much revenue? The answer would always be yes. Facebook acquired the Whatsapp and Instagram because of their winning process that interests a lot of followers or subscribers. There are instances you need not find the winning formula. There are companies who do that.
All you need to do is to secure your traffic by creating a tribe or followers who support your cause. A startup banks on a service or process that was never tried before. Just like Twitter, Groupon, or Foursquare, a startup first explores its market in a limited risk facture because it has limited financing.
The operation may be recently launched without anything yet in terms of the market profiling and the degree of measurable history. There could be less data for comparison of the business volume over multiple time periods.
Startups are considered as high risk ventures because of the lack of history or any metrics of success. They could be struggling to build the client base and even, to generate some kind of revenue stream.
How can a startup get an investor?
Investors look at the potential of the product or service and the expertise of the founders, including the team, if any. A business plan is a good start to entice any investor to finance your project. The investors will evaluate based on how much they are willing to risk putting up cash for your project.