A startup, sometimes written start-up, is a company or project undertaken by one or more entrepreneurs to develop a unique product or service and bring it to market. The company is typically in the early stages of development, and the entrepreneur tests, develops, and validates a scalable economic model. A startup is usually self-funded by members of the founding team, but funding can also be secured through an investor or loan.
While entrepreneurship can refer to all new businesses, whether self employed or those that never intend to become registered, startups are businesses that intend to grow beyond the founder. This type of business faces high uncertainty and has a high rate of failure. However, a minority of startups become successful and influential. Some become unicorns, meaning that they are valued at over $1 billion. Examples of unicorns include Airbnb, Robinhood, and Warby Parker.
The term startup was coined in the 1970s during the early tech revolution. It referred to a new breed of small companies that had surprising growth potential. The term became more popular in the 1990s when companies such as Microsoft and Apple were scaling at an incredibly quick pace.
Characteristics of a startup
Startups have the following characteristics:
- Focused on growth
- Consists of more than one person
- Does not consist of more than 500 people
- Works with technology
- Are innovative
Startup vs. small business
A startup and a small business may seem the same, but they are not. A startup is focused on growth. A small business may be content to stay small, but a startup does not have the same aim. The intent of a startup is to disrupt the market with an impactful business model.
A small business is a self-sustaining organization that generates revenue from the first day of opening. It doesn’t require major investments and time to formulate a model that works. A small business brings in a small amount of sales, enters a local market, and has a small number of employees.
A startup requires initial investments that won’t return immediate results. The company may not be profitable for many years, but the business model will allow for it to scale to large heights.