Every time we hear a startup word, most of the people talk about the startup company, startup business, and so on, but what is a startup actually? The term startup or start-up refers to a company in the first stage of its operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is a demand.
A startup is a company working to solve a problem with a unique business model, where the solution is not obvious and success is not guaranteed,
These companies generally start with high costs and limited revenue which is why they look for capital from a variety of sources such as angel investors and venture capitalists.
According to Merriam-Webster, start-up means “the act or an instance of setting in operation or motion” or “a fledgling business enterprise.” The American Heritage Dictionary suggests it is “a business or undertaking that has recently begun operation.” Therein lies the rub – to be a startup, you must have set up shop recently.
What is a Startup Company?
A startup or startup-up is a young company (fewer than 5 years) that is just beginning to develop. These entrepreneurial ventures are typically started by one or more founders who focus on capitalizing upon a perceived market demand by developing a viable product, service, or platform.
If you’re a start your restaurant that is not a startup it just a business because that business model already exists in the market. To be a Startup your idea should be unique and problem-solving. For example, Uber, SurveyAuto, OYO, Spacemaker, Airbnb, Streem, and so on.
The initial period is so important for startups because so many startups fail within the first few years. According to Research, only one startup can survive out of 10. As we know “Dotcoms” was the most common type of startup in the 1990s. Venture capital was extremely easy to obtain during this time because the majority of investors were eager to invest in these new types of businesses.
Unfortunately, most of these internet startups eventually went burst due to major oversights in their underlying business plans such as a lack of sustainable revenue. However, there were a handful of companies that survived when the dotcom bubble burst. Both Amazon and eBay are examples of such companies.
Startups have a high failure rate, so investors should consider not just the idea, but the business model & business plan for the long run, hire key personnel, management team’s experience, and work out intricate details such as equity stakes for partners and investors. Some special considerations for startups:
Founders/Entrepreneurs:
Founders or co-founders are people involved in the initial launch of startup companies. Anyone can be a co-founder, and an existing company can also be a co-founder, but the most common co-founders are founder-CEOs, engineers, hackers, web developers, web designers, and others involved in the ground level of a new, often venture. The founder that is responsible for the overall strategy of the startup plays the role of founder-CEOs, much like CEOs in established firms.
Solves a Problem:
One of the main factors of Startup is solving a problem. “A startup is a company that solves a problem,” Stephanie says. “If your company isn’t solving a problem, your company is simply an idea.”
Startups always solve the problem of the market or solve market needs. For example, If you’re traveling somewhere and you need the best hotel at a reasonable price in time but there is no option to get it, right, and guess what OYO solved this problem. You can book your room in one click. That’s why your idea or startup should solve the problem.
Solve The Problem In An Innovative Way:
In the above point, we talked about problem-solving, but only problem-solving is not startups. You have to solve the problem in an innovative way.
For example, if you start your restaurant from scratch but that is not the startup, it just a business, because there are so many restaurant businesses are exist in the market and you’re doing the same. But Zomato, Ubereat, or Swiggy are startup because they have a unique & problem-solving business model and new in the market.
Searching for a Product/Service Market Fit:
A startup means a unique business model and problem-solving product and services. But you should know that a particular product and service is does everyone needs it? Is it fair for everyone?
When you make a product and service then you have to solve many other such questions. You have to identify its ideal customers, which products and services those ideal customers purchase, at what price points, and how frequently they make those purchases.
Location:
Startups must decide whether their business is conducted online, in an office/home office, or in a store. The location depends on the product or service being offered.
For example, a technology startup selling virtual reality hardware may need a physical storefront to give customers a face-to-face demonstration of the product’s complex features.
If you’re doing e-commerce business then there is no face-to-face connection with a customer. The customer can’t touch it or feel it in your product and services. So, you have to pay close attention to, how they can buy it without touching it, without feet it or without wearing it.
Focused on fast growth:
“All startups by their very nature will start out being small businesses, but not all small businesses are startups. The difference with startups is that it’s their goal to no longer be a startup at some point in the future, while many small business owners are more than happy for their small businesses to remain small businesses.” For example, Facebook, Amazon, Youtube, Google, Apple are all startups but now they are all billion and trillion-dollar companies.
Startups always focus on fast growth using technology. Its goal is to cover the entire market as quickly as possible and expand globally. That why technology startups are so popular and common because it is easy to expand, they don’t have to open offices everywhere, they don’t have to build infrastructure, they don’t have to hire employees everywhere and so on.
Businesses are always focused on profit and after that, they scale and grow but startups are just oppositive. Startups are always focused on scale and fast growth and then they focused on profitability. This is not the exact rule for all startup but most of the startups are doing this rule.
A Job You Can’t Live Without:
When you’re working for someone else’s company or someone else’s, job is often just a job. But when you’re running a startup? It’s much more.
You can’t compromise, you can’t make any excuses because it’s your dream or big project of your life whether it succeeds in the future or not, there is no guarantee.
A startup is a job you cannot quit and that does not pay. Elon Musk said in an interview that he works 80-100 hours a week.
Startup Funding:
Funding is one of the major sources to grow your startup. Yes, you can sustenance your business at list a few months, or one year using your saving and raising funds from family and friends.
After a year you need more funds to grow and expand more places such as national and international. So, angel investors and venture capitalists are the sources of funding. This is a group of professional investors that specialize in funding startups.
Crowdfunding has become a viable way for many people to get access to the cash they need to move forward in the business process. The entrepreneur sets up a crowdfunding page online, allowing people who believe in the company to donate money.
Risky:
The startup is very risky because they solve market needs or problems in a different way & an innovative way that no one has done before and never tested before. According to research, 90% of startups are failing, which means 1 startup can survive out of 10.
As you know, startups always focus on fast growth but their business model is not tested, nor is there any research on its problem. Since everything is for the first time, startups are very risky.
The risk factor is high, so the investors are investing here, if startups are a success they get a huge amount of ROI (Return Of Investment).
Conclusion:
As you can see the definition of a Startup. Now you can get a major idea what is a startup? right. This is some major factor of a startup, there are many factors that you can learn about a startup. In other words, If you are generating revenues below $20 million, have less than 80 employees, and remain resolutely in control of the company you started, you’re likely running a startup.
When your company becomes a success then there are two choices for you 1. Buy-out, and 2. IPO (Initial Public Offering). Read this article for more information: Startup Funding Explained: Everything You Need to Know.