The essence of a startup, what is it?


The word "startup" has become ubiquitous in our dictionary. Startup entrepreneurship is a fashion trend. However, in reality there is no single understanding of this definition.

Wikipedia defines a startup as “a company with a short history of operations.” However, if you look further, you will find that different people mean completely different things when they use this term.

Some people define a startup simply as a newly registered company with at least one founding employee. However, many also include the scalability attribute in the definition. Others only consider companies that develop software or make hardware as startups.

Since there are so many conflicting definitions, it is difficult to keep them in mind when you are discussing economic policy issues related to a new business.

The reality is that a startup is a temporary status that applies to all business enterprises when they are looking for a viable business model. When you are a startup, you are looking for a repeatable and scalable business model that will generate revenue that will exceed its costs.

We think that a startup is any business that has not yet reached profitability, not a completely ready startup. Having achieved profitability, they lose their startup status and actually become a business.

Startup is any business that has not yet reached profitability.

However, we recently noticed that the press and even some groups of business mentors imply that a startup is an innovation-related business that will at some point need to attract capital from investors. These same people are looking for money to start up on different platforms. Russian startups “sin” this along with the American ones. The platforms are testing startups by users, and maybe by future investors.

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All this can be very confusing for a new entrepreneur. To understand the exact definition of a startup, we need to know the market structure in which the startup will compete. Most startups come down to the four main types.

Existing Market Startup

What is an existing market startup? There are users on the existing market who are already using your type of product or service. There are competitors that already exist in your market.

In the existing market, your job is to basically offer the best in order to attract competitor market share. Since you work in a well-known market, you must develop marketing materials for your sales channels on the first day. The biggest problem is that you are not the only business in your segment and to create a working startup, you need to try.

New Market Startup

There is another type of startup called a new startup on the market. There are no users or competitors in the new market. In fact, you have something so new that no one else knows.

There are many problems when creating a new category of business. It is necessary to loudly declare about yourself, do everything so that users want your product, but to get to know and understand that this is a necessary thing. The cost of attracting customers is very high.

Although many startups are trying to create a new category, the disadvantage is that it greatly complicates the search for customers. You cannot just go outside and ask people direct questions, such as “Would you like this feature?” You will need to find out how they spend their day and tell what the world will be like if they buy your solution.

Your biggest problem in the new market is figuring out how you will attract customers. Since what you offer is new, your income is likely to be very stable for the first few years until the market accepts your offer and makes your decision. If you are lucky, there will come a turning point, you will become a successful startup, when incomes grow. I hope this happens before you run out of money.

What is really important to understand is the difference between existing and new markets. The start-up capital required to start a business in an existing market is very different from the capital requirements and the time required in a new market.

Existing market with an active dominant player

In an existing market, if there is an active or dominant player, his attack may be suicide. There is an axiom according to which you need to approximately four times exceed the budget associated with sales and marketing in order to win the existing market from the leader. It's best to start with a small startup and offer inexpensive alternatives.

You can decide to become a low-cost supplier by reducing or limiting the possibilities of your offer to create a less functional, but cheaper alternative solution. Perhaps you know a lot about the small segment of the client base of the current market leader, which he ignores.

For example, there are more and more women drivers, what if a car repair shop focuses on servicing women-owned cars and the service is fully focused on this segment? Open a waiting area with a playground, so that the children of mom-drivers play while mom is waiting for an oil or tire change?

Startup clone

Another type of startup is the cloning of an existing business model used in another country. Remember that there is no reward for originality. Our numerous TV shows (analogs of American ones), clips, analogues of Barbie dolls are examples of products that “inspired” the creation of clones - quite profitable startups.

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