VOL 43: What is a Startup: How are they different from other companies?
Basic Definition and Characteristics
Hey Friend 🤓,
Trust you all had a great week 🤗?
Let’s take a break from the Apple series this week and talk about Startups.
Today at a Glance:
Quote of the Week
What Is a Startup?
Why do most startups fail?
What is the difference between a startup and a company? & More
Past Greats 👴
Business & Startups
Tweet of the Week
Quote of The Week
“Ideas may be far more important than tools or money in changing nations”
— — —
Scepticism finds no substance when we claim that startups are the ones stealing the spotlight in the twenty-first century.
They are all around us, and if you keep up with the news, you probably have a clue of what a startup is—maybe a group of guys who started a wildly innovative company in their garage using some ground-breaking business strategy.
So What Is a Startup?
The term startup refers to a business that is just getting off the ground. They are created by one or more entrepreneurs who want to develop a product or a service they feel there is a market for. They seek funding from a variety of sources, including venture capitalists, because these companies typically start out with high expenses and little revenue.
Within the first few years, many startups fail. That's why this initial period is important. Entrepreneurs must secure funding, develop a business model and business plan, appoint key employees, iron out complex details like equity stakes for partners and investors, and make long-term plans.
Microsoft, Apple, and Meta (formerly Facebook), to name a few—began as startups and ended up becoming some of today's most prosperous businesses.
Why do most startups fail?
According to business owners, reasons for failure include running out of money, being in the wrong market, a lack of research, poor partnerships, ineffective marketing, and not being an expert in the industry. Setting goals, conducting accurate research, enjoying your work, and not quitting are all ways to succeed.
What is the difference between a startup and a company?
According to Steve Blank, a serial entrepreneur and business school professor. A startup is “a temporary organization designed to look for a business model that is repeatable and scalable.” A company, on the other hand, is "a permanent organization designed to execute a repeatable and scalable business model."
The key distinction is that while businesses already have an appealing business model and are focused on successfully implementing it, startups are looking for one. The needs and nature of both types of organizations are impacted by this distinction.
What are the stages of startups?
Early-stage startup: The early startup stage begins with a potentially scalable idea for a product or service aimed at a market with a high potential for profit maximization. In addition to yourself, your team may consist of only one or two other people.
This phase's funding rounds are referred to as seed, pre-seed, post-seed, pre-A, seed extension etc. Within this funding stage are long and difficult phases of gaining traction and growth.
Venture-funded or Growth stage: This startup stage begins when you receive your first Series A round — each round typically lasts 18 to 24 months, and your first round is critical in laying the groundwork for future investments. Series A funding allows you to expand your team and infrastructure.
Your company is now undergoing a complex transition from having the potential to scale to being expected to meet investor-specified milestones. There may be additional Series A funding rounds, but the first round is usually the most crucial.
Late-Stage startup: A late-stage startup typically has reliable funding sources and is following through on the business plan. When pitching investors for Series A funding, it’s all about potential. Now it’s all about performance.
Founders now push for further expansion. They can begin to consider capitalizing on their stability by diversifying their product offerings or expanding into new markets. If as a founder you decide to expand further, you will need to ask yourself how the business can sustain more growth through acquisition or additional fundraising.
For other founders, realizing they’ve worked extremely hard to establish their company, it might be time to recognize the worth of what they've built. At this stage, many founders and their investors are looking to exit via a sale or an IPO (taking your company public).
What is Unicorn status?
Unicorn companies are those that reach a $1 billion valuation without being listed on the stock market and are the dream of any tech startup. The term was first coined by venture capitalist Aileen Lee in 2013.
How can I raise money for my startup?
Funding provides a solid foundation for your business initiatives and allows them to expand and grow. Finding funding for a new business can be a difficult and time-consuming task. Some of the ways startups are funded are as follows:
Self-Finance your Start-up Business
Find an Angel Investor
Apply for Venture Capitalists funding
Find Strategic partners
Look out for Crowdfunding
Apply for Loans under Government Schemes
Why do startups need funding?
Funding provides founders with the funds they require to nurture their idea so that the business can grow and succeed. It assists a startup in scaling to the point where it can attract additional venture capital and generate a high return for an investor.
Can a startup work without funding?
There are several ways for a startup to start making money even without any investment or funding. Many industry experts believe that, in the long run, external aid does more harm than good.
How long is a company considered a startup?
A startup is a company no older than 3-5 years.
At what point are you not a startup?
Alex Wilhelm of Techcrunch devised the 50-100-500 rule, which states that you are no longer considered a startup if your revenue exceeds $50 million, you have 100 or more employees, and your company is valued at $500 million or more.
Precisely, a startup is a business that;
Disrupts the market or industry,
Solves a problem, and
Operates under extreme uncertainty.
Having a great idea and attempting to market it presents a number of difficulties, including securing funding, hiring staff, marketing, handling legal matters, and controlling finances. However, the risk often pays off and most times opens up wonderful learning opportunities.
Even though it can be challenging, starting a business can be very rewarding.
That’s all for this week, folks. Back to Apple next week.
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MAX WEBER (1864 –1920)
Weber was a German sociologist, historian, jurist, and political economist who is regarded as one of the most influential theorists of modern Western society's development. His ideas have had a significant impact on social theory and research.
While Weber did not see himself as a sociologist. He, Emile Durkheim, and Karl Marx are said to be the three founders of Sociology.
Sociology, for Max Weber, is "a science which attempts the interpretive understanding of social action in order thereby to arrive at a causal explanation of its course and effects".
He is well-known for his studies of bureaucracy and the relationship between Protestantism and capitalism. Like many writers and thinkers of his day, he was interested in how this new industrial society came to be. His most famous work, The Protestant Ethic and the Spirit of Capitalism was a partial answer to that question.
According to Weber, the rationalization of society was a defining feature of the modern era.
Weber spent his life in a rapidly industrializing and increasing militaristic Germany, living through the devastations of the First World War, and witnessing the rise of fascism during the early years of the Weimar Republic.
Business & Startups
Education is the key to a better future, but the Nigerian education system is broken. Acceede is a Nigerian startup dedicated to providing high-quality education to all students.
As a parent, Acceede relieves your stress by paying your child's school fees at the start of the term, and you can pay back monthly for up to three months. Acceede, essentially, is an Edtech in mission, Fintech in operations.
With the goal of lowering the financial barrier to accessing quality education in Africa, Acceede is eager to work with you to democratize access to quality education whether you are a parent, school owner, investor or policymaker.
Check them at Acceede.com
The video game industry makes more than the film and music industry combined annually.
Tweet of The Week
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