“You need to have the right mindset about what is, and what makes a startup in order to thrive and grow in its world”
Ask your friends if they know someone who works at a startup, and they might do. The term “startup” still sounds vague for most of people. From single founder with few team members to the big tech companies, people call them “startup”. As startup is sporadically built here and there, an interesting question arises: Is all of them really a startup? What defines a startup? Since "startup" is booming now and it seems that everyone has one, In this article,we need to explain the core definition of startup and what makes it different from a small business.
The Core of Startup
Startup is typically a company in the early stages of development of a product and usually self-funded by the founding team. It started by 1 to 3 founders who put their focus on capitalizing upon a market demand by developing usable product, or platform that can scale fast. According to Neil Blumenthal, co-founder and co-CEO of Warby Parker, “A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed.” So it actually has a solid and noble purpose that differs from small business.
Startups are not smaller versions of large companies
Startup tries to solve a specific problem that not much people look into. This is the most definitive thing that separates startup and small business. Both startup and small business might operate with one goal in mind: profit. However, how to acquire it is different on both sides. Small business often used a proven way of doing something and rarely offers a unique solution.
“A startup is a modern version of an inventor. It experiences a problem and then tries to solve it with ingenuity. A successful startup typically wants to solve a problem and make the world a better place,” said Jochem Wijnands , a Founder of a startup that was acquired by Apple in 2014 and TRVL.com. In the startup world, idea and rapid innovation are everything.
Another important point which separates startup from small business is the ability to scale fast. Startup has the ability to scale fast and not be hindered by geographical limitation. The founders focus on growth. A small business may stay as small business forever, but a startup doesn’t want and shouldn’t stay small.
According to Steve Benson , Founder and CEO of Badger Maps, “A startup to me is when a person or group of people are trying to figure out an idea and then executing that idea with the goal of becoming a sustainable business model.” In order to support that, the solution offered by startup must be able to be replicated or enhanced fast as the part of scale-up in no time.
What scalability means?
Scalability means that your business has the potential to multiply revenue with a minimal incremental cost. That can be done when you have a proven product and proven business model. That’s why most startup sells a product, not services to allow them to scale fast. For example, when your startup sells a software product, It costs money to build the original one, but after that, your company can make hundred of copies in no time. The product can be quickly cloned for almost no incremental cost, while for service, you need experts. Multiplying the number of experts is slow and expensive. Although, not all of the startups have to sell the product to scale fast. One can still consider a startup if they fulfil the earlier points.
The High Risk and High Reward in Startup World
Startup is the type of business that has a very high risk and very high reward. The risk is introduced mainly because of the non-obvious solution, which doesn't guarantee success. The National Venture Capital Association estimates that only 25 to 30% of venture-backed business fail completely. It means for every 10 startups an investor's backs, 2-3 of them will go out of business, while 4-5 might return their original investment (or something close). So one or two startups will drive the vast majority of a funds financial returns.
It’s easy to blame the investors and think they don’t want to take a risk when your startup doesn’t get funded. Most of them actually want to take the calculated risk and avoid the unnecessary risks. So it’s important for you as the startup entrepreneur, to be honest with yourself about the difference between the risk factors you can and should be mitigating, with the ones you can’t control.
Based on the explanation above, it seems like a startup is more of a mindset to look up for rather than a specific measurement. These are the philosophical distinctions about what makes your company a startup. Before you decide you want to create or working in a startup, make sure you also plant the mindset inside of you on what’s this all about. The mindset will determine your will to thrive in the startup business. By all means, in the world that constantly moves forward and improves, a correct mindset is important in order to provide something of value and stand out in the market.
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