A startup in the usual sense is a new company or business that has been created recently. The most complete definition of this phenomenon was given by Steve Blank, an entrepreneur and professor at Stanford, Berkeley and Imperial College. According to him, it is “a temporary organization set up to find a business model that is repeatable and scalable.”
Startups are looking for an attractive business model, while companies already have one and are focused on executing it successfully. By the way, a startup doesn’t necessarily involve technical innovation or invention – it focuses specifically on new business models.
This distinction between a startup and a company affects the nature and needs of both types of organizations.
In addition to the fact that a startup does not have a ready-made business model, industry analysts highlight a number of other features of such a project:
- Novelty – sometimes startups don’t even have a registered organizational form;
- Minimal startup costs – startups may not have their own capital, and development happens at the expense of third-party investment;
- A unique idea – a startup will only be successful if its idea has not been used before, and it will be useful for clients and profitable for investors;
- Fast growth – the startup does not have time to get up and running, it needs to find an effective promotion strategy as soon as possible.
Stages of startup development
Every startup goes through several stages before it enters the market. However, in some cases, the author of an idea may consciously skip several stages, if the situation allows. The main thing is to determine, before launching, what will happen to the startup after it attracts investment. This may be a move to a traditional business, a sale, or a launch on the stock market. Such information is especially important for potential investors to understand the risks and return on investment.
There are several basic stages that a startup goes through:
- Problem/Solution Fit – confirmation of the problem and that the proposed product will solve it;
- Minimum Viable Product (MVP) – development of a working prototype with the minimum functionality to solve the problem; release of the alpha version and testing its flaws;
- Product/Market Fit – confirmation that the product has a market (closed beta of the product);
- Scale – scaling the business model (open beta and release of the consumer version of the product);
- Maturity – the transition from startup to business.