What’s up with start-ups?
By a start-up, we generally mean an enterprise or an entrepreneurial venture in the early stages of its development. Such ventures are promoted by a single or by two or more founders together who focus on exploiting a perceived market demand by developing a viable product, service, or platform.
Let me quote here a popular definition of a start-up from Eric Ries, an American author known for his book, “The Lean Startup”:
“A start-up is a human institution designed to create a new product or service under conditions of extreme uncertainty.”Eric Ries
During the early stages, start-ups are usually self-funded by members of the founding team — though many entrepreneurs either resort to bootstrapping or secure funding through an investor or take out a loan from a bank or development financial institution (DFI) to help fund their venture.
A start-up is like prototyping a concept – it creates something new or novel.
The difference between a small business and a start-up!
Let us understand one important thing here, whereas small businesses may be happy staying small businesses forever – a start-up does not want to remain small all the time. Most start-up companies generally have a bubbling desire to scale up their businesses and grow – and more importantly, grow fast – deploying technology to do so.
A start-up means continuously identifying and solving problems – one after another.
A start-up journey is all about enthusiasm to push your limits and do a lot of experimentation. When you are managing your start-up – you have so many questions about your business model and its long-term sustainability. You want to know and understand about your customers, employees, suppliers, and others in your immediate and remote external environment.
As a start-up entrepreneur, you must always strive for that ideal or the best possible product/market fit. This will involve trying to identify your ideal customers, which products and services those ideal customers purchase, at what price points, and how frequently they make those purchases. Paying attention to the core metrics like average customer lifetime value (LTV), cost of customer acquisition (COCA), and average sales cycle length is also important to many start-up entrepreneurs.
A start-up company should also identify those unmet needs or gaps in the relevant market space that the entrepreneur can fill.
A start-up can also try to change the ways things are traditionally done. This will call for a resource-based approach on the part of the entrepreneur – where the entrepreneur develops a new product or service from the resources and competencies available to them within the enterprise and then educates the customers to try these new offerings. Customer education coupled with adequate promotion and advertising will form an integral part of this strategy.
Let us be very clear about one thing – a start-up refers to starting from scratch. If you have already nailed your product-market fit and started making some money (revenue) – then you are not a start-up.
A start-up is any business venture that is starting from scratch (earning zero revenue) and trying to build something of value.
A start-up is a group of people who bring about disruptive changes in the world.
Businesses can be considered to be in the start-up phase, “from zero revenue until they have found the best product-market fit, a valid business model, and replicable revenue generation strategies. Once those criteria are met, the business is no longer a start-up and instead moves to the scaling phase.”
What are some traits associated with start-ups?
Start-up implies a phase of the company where success is not yet determined. A team defines what a start-up is. A start-up is the largest group of rebels, rule-breakers, and unconventional thinkers that you can find, convince and inspire to create breakthrough change in the world. They are crazy. They view the world from a different angle and are not afraid to fail.
The focus of any start-up is on continuously testing, iterating, and learning.
A start-up is also characterized as a mix of emotions – start-up embodies these intense emotions of fear, nervousness, anxiety, and uncertainty. It is that peculiar feeling in your stomach that aches before you ride a rollercoaster or the nerves that flood your body before meeting someone new on a date!
A start-up is lean and adaptive. A start-up is a company that may not always have so many employees – it is an organization where individuals are working together towards a common goal, and that goal is usually highly innovative. They are heavily defined by their actions and execution, not just their ideas. It is mostly young, ambitious with a growing number of people with momentum around an idea or innovation.
In conclusion, I’d like to add that one should not mistake a start-up to be any company with a ping pong table, cool office decor, employee outings, loose regulations, and/or casual behaviour. A start-up is about actionable innovations around ideas!
In my upcoming post next week, I will be elaborating about the common problems that start-ups face like raising capital, failure of business model, poor human resource management and more… Obviously, I will also write about strategies an entrepreneur can deploy to mitigate such situations.
STAY TUNED FOR NEXT WEEK’S POST!
- McGowan, Emma. “What Is a Startup Company, Anyway?” Startups.Com, 1 Mar. 2018, http://www.startups.com/library/expert-advice/what-is-a-startup-company.
- Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Business, 2011.