The word startup is fashionable, but what distinguishes a startup from a small or large company?
In fact, the concept of startup is still quite new among Angolans. And we are experiencing a hyping of the word startup, lately everyone talks about startups, it's as if everyone and their mothers now have startups - from the app, the clothing boutique or trailer - but in reality there are very few real startups in Angola.
To demystify the concept of startup, in the last Startup conversations we did not have to reinvent the wheel, because the concept of startup is very well defined by people much more intelligent than us, who studied very well what differentiates a startup from the traditional company (small or big).
We start with a bit of history: the term startup became popular during the dot-com crisis (dot-com), in the years 90s. At the time, a speculative bubble was formed characterized by the increase in the shares of the new information and communication technology (ICT) companies. The Internet Bubble, as it was commonly known, adopted and began to use the term startup, which until then only meant a group of people working on a different idea and with the potential to make lots of money.
Let's start by clarifying what a startup is not:
● A startup is not a smaller version of a large company
● A startup is not a business idea
● A startup is not a company without money
● A startup is not an app
These were some of the responses Startup Conversation participants gave at the beginning of the session.
So, what is a startup after all?
I will start by summarizing what is a startup, joining the contributions of three major influencers in the world of entrepreneurship globally, according to their wide acceptance and complementarity, are those of Steve Blank, Eric Ries and Paul Graham.
A startup is a temporary organization, which in search of a repeatable and scalable business model, is designed to deliver a new product or service and to grow rapidly, working in conditions of extreme uncertainty.
Below, then follow three definitions of startup in more detail:
➤ The legend of Silicon Valley (Silicon Valley) and serial entrepreneur Steve Blank defines the startup (in the context of the technology industry) as an organization temporary designed to look for a repeatable and scalable business model. This means that the startup's goal is to try to validate its business model - create hypotheses and test them, find out who its customers are, find out its distribution channels and partners, find out how it will make money - to quickly grow , generate profit and become a big company (stop being a startup), impacting global markets. For a business to be repeatable means that it is capable of delivering the same product on a potentially unlimited scale. Being scalable means growing more and more without this influencing the business model.
According to Blank, the founder of the startup does not want to be just his / her own boss, but rather to conquer the world. From the first day of startup, the goal is to grow startup to be a great company, which will bring innovation and disruption and conquer markets. The founder believes that he is creating "the next big thing". While a small or medium-sized enterprise (SME) establishes itself in a proven business model, they do not necessarily have an innovative product or service and focus on securing their place and serving the local market (eg beauty, grocery store, restaurant, etc.). Therefore, the driving force of a startup is different from that of an SME.
➤ Eric Ries, disciple of Steve Blank, is another startup guru and entrepreneur and author of the methodology Lean Startup, sets startup as a human institution designed to deliver a new product or service em conditions of extreme uncertainty. Ries argues that innovation is at the core of a company's success, and as innovation is inherently risky, startups are confronted with conditions of extreme uncertainty as they are bringing a new product or service to the market without being sure if this will be successful. The definition of Ries also excludes the size, a startup does not have to do with its size, that is, either it can be a startup of two or 100 people.
➤ Paul Graham, YOU (Venture Capitalist) and co-founder of Y Combinator (one of the best startups accelerators in the world) defines startup as a company designed to grow rapidly. The focus here is on growth, and without geographic constraints, which differentiates startups from SMEs. To grow rapidly, it means that the startup has to create something with potential sales to the global market (for example: a Tupuca is different from a restaurant The restaurant is not scalable.) Graham adds that for a startup to grow big, it has to create something that many people want and reach for and serve them all. It is certain that a restaurant does something that many people want, the limitation is that it only offers a certain range of choices and will hardly be able to serve all. Graham also argues that a startup does not necessarily have to be technological, as long as the focus is on growing rapidly in order to become a global enterprise.
Still, another aspect that differentiates the startup from a traditional company is the way the startup is financed. Venture Capital (VC) financing is very popular in startups, as they usually seek to be disruptive, and without venture capital, it is very difficult to persist in the search for a business model that starts generating profit and sustains itself . The ideal is for the business to survive until the business model is validated and its revenue to start growing. Otherwise, the startup will probably have to make a new round of investments. This was the case, for example, with Facebook, Uber or Snapchat.
For Business VCs and Business Angels that invest in startups the goal is for them to have an exit (startup exit) successful, for example, via an IPO (Initial Public Offering), M&A (Merger & Acquisition) or sale.
Bonus Question:
And when does a startup stop being a startup?
I can say that it is generally accepted, although there are those who disagree, that a startup stops being a startup when it finds its repeatable and scalable business model. And usually this happens in a period of 5 to 7 years.
Don't call your startup company, so you'll help avoid startup hype 😉. And there is nothing wrong with being an SME. The important thing is to generate employment, economic impact and social welfare. The important thing is to make the economy grow and contribute to the prosperity of society.
Article originally published by Vanda Oliveira , republished at MenosFios.com with your authorization.
