What is a Start-Up?
A start-up or startup is a company that has only just been “started up”; it is in the beginning stages of operation and often is involved in developing a new product, service or concept. The term start-up is often associated with innovative new companies. Start-up founders are usually looking for a repeatable and scalable business model based on innovative technology or concepts. These newly emerging companies aim to develop a viable business that can fill a gap in the market; meet a need or solve a problem faced by an industry.
Start-Ups and Entrepreneurship
As both start-up companies and entrepreneurs are aiming to develop a viable, scalable initiative they are very similar. The difference being that the term “entrepreneur” can refer to a new business; one-man operation or even a business that has no intention of growing or eventually being a registered company. Start-ups, on the other hand are new businesses with a vision for the future that involves expansion and development into a large company. Any kind of company can be called a start-up, no matter what industry they are involved in. However, the term is most often used to describe new high-tech companies that create innovative technology.
Start-Ups – Going into the Unknown
The one common factor among all start-ups is that they are going into the unknown – their future is uncertain as there are more failed start-ups than success stories. Those that do manage to survive and prosper usually go on to become large and influential companies. Some even become “unicorns” – privately-owned start-ups valued at over $1 million. One report showed that by March 2018 there were 279 unicorns mostly located in China and the US.
Can you Learn to Be a Successful Start-Up?
The Lean Start-Up method claims to teach business people how to become a successful start-up by following certain steps to get the desired results. With the Lean Start-Up method, you can use a set of principles to create a product and get it into the hands of your customers even if your resources are limited. This method helps you to build a business for less and with a more flexible business plan. One of the main concept behind the Lean Start-Up is that entrepreneurs should not assume what the customer wants and instead should eliminate uncertainty and work according to an organized methodology. This means using empirical testing to gauge the workability of the product, validate assumptions or realize things that should be changed in a continuous cycle of build-measure-learn until the product is ready to launch. Lean Start-Up offers a set of design principles for developing an idea or product through repeated learning, testing and adapting.
Lean Start-Up Principles:
- Decide on a problem you want to solve; define the solution.
- Use early adopters for feedback and market validation.
- Continue to test repeatedly, each time adapting according to the results.
- Build a function, assess customer response and verify or refute the idea.
- Make evidence-based decisions about when or how to “pivot” and change your plan’s course.
- Maximize speed, learning and focus.
Funding a Start-Up
Start-Ups are often based on the founder’s product concept or on an idea that immerges during the initial stages of proof of concept. The founder of the start-up is usually the force behind the business, the development and scaling of the company prior to making a profit. For this reason, the value of a start-up can’t really be associated with the actual revenue generated in the early stages but rather in the potential value based on profit projections. Some founders fund their start-ups using their private assets; others borrow to fund the set-up of the business and its initial day-to-day activities or they can turn to angel investors and later venture capitalists.
Another way that the financial needs of a start-up are met in the initial stages is by using workspaces that are supported by non-profit or government organizations or other supporting entities. These “incubator” spaces and offices often come with the support of experienced business leaders and mentor entrepreneurs to help back-up the start-up and get it on its feet.
Real profits may not be seen until much later in the life of the start-up and some start-up investors and founders often only really recoup their investment when the start-up is sold to a larger, more established company. Selling the start-up is one exit strategy; the other is taking the start-up public. If the start-up chooses to stay private, they can use their profits to reinvest in the business and generate more profits for the founders and employees.
The Start-Up as an Egalitarian Community
There is often a great deal of comradery and excitement in a start-up business with everyone passionately focused on the purpose of the company. The egalitarian start-up culture encourages team work where there is an ensemble group often working together in an open-plan workspace, shoulder-to-shoulder. That said, the founders and company executives still lead and steer the team as well as acting as the face of the company and its products.