Points you may have not known about what a startup is!

what is a startup

Points you may have not known about what a startup is!

What is a startup and how can we run it successfully?!

Most of us have heard the word “startup” at least once, especially these days when we are witnessing the emergence and significant growth of this phenomenon in many parts of the world. Many of these startups have provided a wide variety of applications and services that became part of our lives today. The millions of revenue made by these businesses along with their rapid growth have attracted many people to this phenomenon. As a result, the birth of lots of startup ideas has become a trend throughout the world! If we take a look at our surrounding people we would find at least one person who has a startup idea in his/her mind! However, with all these numerous start-up businesses emerging every day throughout the world, the question is which idea should we start our startup with to be successful! I should say before thinking about the startup ideas, we should actually have a clear understanding of what a startup is, how they are funded and how they work in order to know how we should run them correctly. Then, we can think about finding the right ideas! Follow this article to understand the startup’s definition and its key activities along with its funding!
Did you know?

According to a census by the US government, startups alone have been able to create more than 2 million jobs in 2015!

Table of content

What is a startup?
  • What are the key activities of a startup?
What are the features of successful startups?
What are the funding stages of a startup?
Blog at a glance

What is a startup?

what is a startup

To many people, when it is asked what a startup is, they may first think of start-ups as businesses operating in the field of technology. Some may think that startups are businesses that operate online. However, I must say that these definitions of a startup business are not completely right. So here comes the question that what is a startup?
A start-up business is an organization, consisting of one or more people, who create a scalable economic model and grow it to be profitable. Simply put, a person, who is an entrepreneur, implements an idea that would disrupt the traditional business ideas by providing new products or services to the market, or by making innovations in the already existing products or services. In fact, start-ups bring new methods in the world of entrepreneurship by providing something that doesn’t exist in the market; even if it does, it has not reached a stable point yet! For example, when Uber was started, there were no online taxi platforms in the market. Uber was established and disrupted the traditional way of getting taxis.
According to Forbes, 9 out of 10 startups fail! But, despite this high probability of failure, what is the secret behind the high number of startups being established? The answer is very simple, fast growth and great profits! Without a doubt, startup businesses have the fastest growth plus high amounts of ROI (return on investment)!
Did you know?

Private startups valued at more than $1 billion are called Unicorns. 

What are the key activities of a startup?

To have a clear understanding of what a startup is, we should learn about their key activities too. These are the significant points that set a start-up business apart from other businesses. A startup is in fact a type of business that has no other example in the market; it involves starting something that has never been done before or has not reached a stable point. By stable point here I mean reaching a point where the failure risks are minimized, the products/services are demanded by the market, and revenue is made regularly. thus, the path for starting a start-up business would have a lot more unknowns and challenges compared to other types of businesses. To face these challenges and overcome the unknowns, there are some activities done in starting a startup. So what are those key activities of a startup?

what is a startup

  • The problem discovery: a startup business is based on an idea that mostly solves people’s problems or satisfies their needs. Well, we should spot the needs and struggle people have in a market in order to find a solution toward that. This can be used as a startup idea to start our business with. In fact, startups provide products, services, or new methods for the market in order to satisfy customers’ needs and relieve their pain points.
  • Market research: one of the most important points in every business, especially startups, is market research. Because a start-up business brings in almost untried ideas to the market, it is essential to do market research for it. Market research helps us to identify our target audience, their demands, our competitors (if any available), market size, etc. the most important thing about market research is interviewing our potential customers to thoroughly understand their needs!
  • MVP (minimum viable product): minimum viable product is the simplest form of the product that we are going to provide to our target market. MVP is needed to know what is the probability of our startup idea to become successful. MVP is used to see how many early adopters from our target audience are going to demand and actually buy our product as well as used to receive their feedback about our idea! This would help us understand the feasibility of our idea along with learning about our target audience’s needs and expectations. You can learn more about the minimum viable product by reading what is an MVP article. 
  • Pitch Deck: pitch deck is a type of presentation used for introducing our business to potential investors. Startups, usually need big funds to develop and grow. Therefore, most startups need investors to invest in them. So, a pitch deck is one of the remarkable activities for us to attract investors for our start-up business with!

What are the features of successful startups?

If we are going to build up our startup company, besides knowing what a startup is, it is good to know some of the features of successful startup companies. So, here are three of the most important features of startups that have grown into large companies:

what is a startup

  • High customer retention capabilities: One of the most important features of large companies that started as a startup is the high power of retaining customers. For example, many of us happen to open our Instagram at least once a day. When we compare this to an application that we may not even open once a week, we can recognize their difference here. Instagram, a startup company, has features that turn this app into an everyday app for us, being a part of our lives by making it a habit for us to check on the app. Therefore we can see what is a successful startup and how it can succeed by turning its customers into loyal ones!
  • Viral Marketing: Traditional marketing and advertising can be costly for business owners, and it may take a longer period to reach goals. Since most of the startups have a limited amount of resources, high pace and lower costs are very important for them. Therefore, using traditional marketing strategies won’t be a good idea for a startup to attract customers with. Successful startups with millions of customer bases spend relatively less money on direct marketing and advertising. Instead, they use viral marketing techniques and as a result, many of them have millions of users! But the question is that what is viral marketing in a startup? Viral marketing is a type of marketing technique that the customers themselves would advertise our company’s products/ services or brand. Different techniques such as referrals and word of mouth are examples of viral marketing. When a company uses techniques like referrals or showing the unique features of a product or brand it makes one customer tell to some of his/her surrounding people about our brand And then, each one of those people would talk about our products to some other group of people. This continues until a big customer base is made! This is so much useful for start-up companies as they would invest a little amount in their marketing and then lots of customers are attracted to them. An obvious example of a successful startup using these techniques is Uber, which used referrals!
  • Attracting early adopters: there are different types of people out there in the market. A part of the market consists of people who would buy branded products, something that is flawless and has been on the market for a while! On the other hand, there is a group of people in the market that are looking for innovative products and they are ready to be the first people to buy these new innovative products. This group of people is called early adopters. So what do they have to do with a startup? Well, startups are all about new innovative products/services that are new to the market, hence it is important to attract early adopters. Most of the market is made up of the majority of people who would prefer to use flawless products. Therefore to attract these people we need to attract early adopters first, then enhance our products based on their needs and preferences, finally releasing a product that satisfies early adopters the most. Once we conquer their hearts by providing a completely useful product, we can build up a good reputation this would make our brand more credited, and as a result, we can attract other customers too rather than early adopters!  For example, Facebook, which is one of the most successful startups in the world, first targeted members of the Ivy League Universities group and then expanded its target market. 
Did you know?

According to Fundera, 14% of startups fail because they do not pay attention to the needs of their customers!

What are the funding stages of a startup?

what is a startup

One of the vital steps needed to be taken in starting any type of business, is the way we fund it. Therefore, startups are no exception here. Startups are large-scale types of businesses that have the potential to grow big enough to bring in high amounts of profits. However, to do so it needs to be supported financially. In order to run a start-up company successfully, we should know what are the startup business funding stages as well as knowing how a startup is funded! Well, there are different methods for funding a startup business and this is varied from funding the business with our own money, our friends or family, collecting small amounts of money from a big group of people, getting loans from banks, obtaining funds from individual investors or firms that invest in the hope of high returns, etc. after that we would need to know what are the stages of funding a startup. So here are the stages:
  • Pre-seed: this is the stage where we have the idea and we want to start our business with. At this stage, we would need an initial amount of capital to start our start-up, gather our team and make the MVP. Well, here the business would be most probably funded with our own savings, families or friends, small bank loans, etc. 
  • Seed: at this stage, our startup company needs to raise its capital in order to start producing the complete version of its product and provide it to the market. Here the capital is also needed for marketing and some other activities to sell the product. Here the funding process would most probably take place with investors investing in our business or by collecting small amounts of money from a large number of people (crowdfunding).
  • Series A: series A takes place when we want to grow and increase the revenue of our startup company. Here the business needs to get funded with usually a higher amount compared to the seed stage. This usually gets done with investors investing in our business.
  • Series B: series B funding is usually done by the investor firms (venture capital funding) and the capital amount injected into the business is higher than series A! So what is the reason for this stage of funding in a startup? The reason for this stage is because of developing our company more and increasing its market share.
  • Series C: in series C, our startup business has reached to a well-developed stage and here we would want to add new products or expand our business and acquire new markets. Anyway, at this stage, the start-up company is funded by investors (usually those investors from the previous stages) with a higher amount of capital than series B.
  • Series D and E: series D and after that E are the stages at which we would need to raise our capital either because we have failed to reach our goals from the previous stage of funding, or we would want to grow and expand our business more. However, these two stages (series D and series E) would take place for some of the companies, many companies won’t go further than series C!
Did you know?

The average amount of funding for a startup in series C is around 50 million dollars!

Blog at a glance

The rise of numerous startups, the high rates at which they grow, and the massive amount of profits they make have all become good reasons for us to start our own start-up business. However, in order to be successful in this path, we should first have a clear understanding of what is a startup as well as learning about its key activities and its funding methods. Then we can take a step further and start thinking about the best startup ideas and how to start our start-up company! Here in this article, we have learned about the startup definition as well as its key activities, features, and funding methods. now if you are ready you can take a further step and learn the steps of running a startup by reading how to start a startup blog.

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