WHAT IS A STARTUP?
Any newly established business is a startup.
WHY ENTREPRENEURS STARTUP?
A startup is founded to bring innovative products/services to the market.
"A startup is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship includes all new businesses, including self-employment and businesses that do not intend to go public, startups are new businesses that intend to grow large beyond the solo founder."
—Wikipedia
IS STARTUP A FANCY WORD?
No. It is not fancy, but different.
A startup and a business are two distinct types of companies with different goals, strategies, and risk profiles.
A small business is a privately held company, partnership, or sole proprietorship that is focused on creating and maintaining a stable revenue stream.
A startup is a temporary organization designed to search for a repeatable and scalable business model. Once they find a proven business model, they enter the typical business realm.
Startups are characterized by their focus on high growth potential. They are willing to take higher levels of risk in pursuit of growth through innovation and the use of new technologies, business models, or approaches.
Small businesses do not look to disrupt markets. They do not want to grow at a rapid pace. They are more risk-averse and focused on maintaining profitability and stability.
A startup aims to solve an industry problem in 2-3 years which a typical business aims to accomplish in 10 years.
All new businesses are startups; the term specifically refers to companies with high-growth potential and a focus on disruptive innovation.
[A key reminder: disruption need not be big. It can be small. And often it is small at first. Do not think of disrupting an entire industry in the early stages.]
EXAMPLES OF WHAT IS and WHAT IS NOT A STARTUP
Not a Startup:
Opening a grocery business.
Opening a coaching center.
Opening a real estate business.
Startup:
Software that uses AI/data to analyze consumer trends and optimize the grocery supply chain
An AI platform that gives personalized coaching to each learner
An AI software that gives numerous home plans at a click
As you can see, each of these startups has a high risk of adaptability. The founder would need a lot of effort to build and market the product, both expensive. But once successful, each will replace a lot of manual work and if successful, can also print lots of money.
A NEW BUSINESS MODEL
A new business model often operates under conditions of extreme uncertainty. There are numerous risks - market risks, technology risks, IP risks, security risks, financial risks, etc. With so much to tackle, an entrepreneur does not want the startup to get industry-average returns. But aims to create a product or service that is unique and irreplaceable for customers.
To tackle the issues, the entrepreneur needs to be prepared to bear high costs and get limited or no revenue in the early stages.
Although disruptive startups can be cost-intensive, if the bets are high on the product, and a valid business model can be created, an entrepreneur can seek capital from various sources such as venture capitalists, family and friends, crowdfunding, or loans.
To sum up - A startup has a business model that does not exist yet. They are high-growth engines built for scalability. No wonder, startups are typically founded in the tech industry or in the existing industry that lacks technological prowess. The reason is scalability and higher returns.
Startups are fragile and thus have high rates of failure. The reason for their fragility is obvious: they disrupt the status quo. Startups try to solve something that large businesses can’t. The gap that startups fill is risky because it needs to be filled fast. Because given enough time, any big company will fill the gap. Startup is also about bringing something new to the market.
Anything new brings discomfort.
New is uncertain - which makes it uncomfortable.
New is suspicious - fear of failure/cheat
New has distrust due to fear of not lasting long
New needs effort - building and spreading the word
Think of a startup as a newborn baby. Any startup goes through similar stages as a baby till it becomes a mentally, physically, and financially independent adult.
SUCCESSFUL STARTUP EXAMPLES
Uber
Google
Airbnb
Zomato
RedBus
BookMyShow
YourStory
The Better India
Amazon
Facebook
These startups have been highly successful, achieving substantial growth, market impact, and financial valuation.
They were innovative, disrupted traditional industries, and created new markets.
What about you?
Are you interested in building a startup? Great! There is a lot of support available today. Like this newsletter. In the upcoming issues, I will share resources, insights, frameworks, and ideas that will bring you a step closer to successfully building a startup. Stay tuned.
P.P.S. Thank you to Akash Bhaskar for reviewing this newsletter.
Akash is the founder of Petrons.com (a community and digital portal for pet lovers) and CXO of Human Library Café (a café and library where people interact).
He was a community manager at YourStory Media ( India's biggest platform dedicated to fostering the startup ecosystem).
Get in touch with him on LinkedIn.
Did you like this issue? Post your thoughts. Interested in sharing something with me, drop a DM on LinkedIn