What is a startup? A business with question marks
In the middle of a lively discussion, one of your best friends made an interesting observation about startups and set things in motion. You had just identified a real problem, and each of you had come up with interesting suggestions about possible solutions. How come nobody had thought about this before you wondered. Your friend observed that so many people would want to use your service. In fact if such a service was available, she added, it could change the world!
So, what's next you asked? This sounds like a brilliant idea we can't just let someone else turn into a business, we need to create a startup, find investors and make a dent in the universe. That's how your startup was born.
What is a startup?
A startup is a business with a new way of solving a problem. Startups are founded by enthusiastic people who believe that they can build a successful business around a novel idea.
In a startup the novel implementation usually comes first, and other business considerations are usually secondary, such as how to make money (the business model), how many people really want to use the product (the market) and how to reach customers (distribution).
Startup founders typically have a detailed vision of the product they want to bring to market, but they may not be so sure about the other aspects of the business.
Startup founders must build a successful business around a novel solution. However, problems often arise and reality destroys lofty dreams. There's a very high rate of failure. That's because a successful business requires more than an innovative solution.
How to turn a startup into a successful business?
- The startup must offer a solution that generates revenue: people are willing to pay for some of the benefits.
- The startup must be able to make a profit. The solution cannot be more expensive to deliver than what it costs.
- The startup must be able to find a growing number of customers.
Many startups have a good idea but make wrong assumptions about the above requirements: they do not make enough money; their solution is too expensive, or there are not enough people who want what they offer.
A startup is thus a blueprint for a successful business that may turn out not to be good after all, once everyone sobers up and smells the coffee.
Startups turn new ideas into wealth, despite the uncertainty
When investors think they have run out of ways to make more money, they can turn to startups. The biggest difference between a business and a startup is uncertainty. Startups are like embryos, they come with many questions mark: is it going to develop into a healthy baby? Will she be popular on social media? Will he be tall and handsome? Every founder must ask similar questions and need to always sound very confident when asked to predict the future.
Startups are usually small, founded by a handful of people who often have to work very hard to prove that their assumptions are correct. A startup may become really big if it manages to attract enough investment or if it becomes a fastgrowing profitable business. The most talked about category is technology or tech startups. Software allows distribution to billions of people at relatively low costs so successful tech startups can grow into business behemoths. Because successful tech startups grow very fast, startups are often associated with fast growing business models. However, the most defining characteristic of a startup remains creativity, not market size nor the use of technology.
Do you have to be confused to create a startup?
If you know all the answers or you come from the future you probably do not have a startup, you have a small business, like a barber shop or a carwash franchise. Extreme uncertainty is part of the startup game. Naivete, confusion, speculation and lack of answers are often badges of honor. That's also why most startups fail. Startups are founded by people who are happy not to have all the answers; they would rather take a huge risk than work on a proven business concept like a nail salon.
Startup founders and investors rightfully expect huge returns when their assumptions turn out to be correct. Scalability and the potential to earn huge returns on your investments certainly matter when you are taking huge risks. Tech startups are probably more popular for that reason, they can be cheap to start and yet quickly reach millions of customers via the Internet.
What qualities are most common among successful startup founders?
Successful startup founders are usually credited with various qualities like great insight, hard work, stamina, dedication, perseverance, self-belief, creativity and great presentation skills. Good communication skills are essential to get many people to support a novel idea.
Why so many startups fail with substantial funding and public support?
Startups explore new ways of providing value and eventually, of making money for investors. Bridging the gap between the founders' vision and business success is a very difficult thing to do. Assumptions about the resources required, the market and the customers often turn out to be wrong.
Rate This Post
Rate The Educational Value
Rate The Ease of Understanding and Presentation
Interesting or Boring? Rate the Entertainment Value
Contributor's Box
Founder, lead software engineer, technical writer, and mentor at Boostlane.
I research ways to use artificial intelligence in information management and connect learners with mentors.
My ambition is to contribute to innovation and wealth creation by building a useful information-management platform, sharing knowledge, and helping people develop new skills.