startup company and Startup are used in the business world applied to companies that seek to start, undertake or set up a new business, and refer to business ideas that are beginning or are under construction, and these are generally technology-enabled startups.
The Startup is a great company in its early stage; Unlike an SME, the Startup is based on a business that will be scalable more quickly and easily using digital technologies.
Characteristics of a Startup
It is straightforward to fall into the mistake of assimilating a startup with an SME. Not surprisingly, they are both small businesses. The story is that, although they have certain similarities, startups have particular characteristics that make them different. And so you can see how little it looks like a small and medium company, we will tell you about them below.
They are Scalable
In case someone does not understand business economics terms, when it is said that a business is scalable, it means that it can increase its sales without increasing its expenses. What does that mean? That your profit margin grows over time. It is what we told you in its definition. What sets startups apart from other businesses is that they can generate significant revenues almost from the beginning. Forget about having to be a giant and have a monopoly in the sector to earn a lot of money.
They are Young
And we are not only mentioning to the fact that they are companies that have only been operating for a short time, but that their way of thinking and acting is aligned with a young attitude. In other words, they move away from the more traditional methods and bet from the beginning on aspects such as:
- Family reconciliation.
- A good work environment.
Your Costs are Low
Because they are almost entirely digital businesses and don’t even work with products in many cases, the investment they need is minimal. In fact, in some cases, the cost of a computer, electricity and Internet connection is not more than that. That’s why your profit margins are so wide from the start, and if you don’t think about Airbnb. It is a tourist apartment rental page that does not own any property. And in addition, the three elements that we have told you before are enough to be able to assemble it.
They are Very Technological
Another characteristic of startups is that they know how to take advantage of all the possibilities offered by new technologies. They rely on any innovation that helps them grow, reach more people or even finance themselves. It makes them always one step ahead of their competition and achieves a more significant market share.
They Are Innovative
If you add a young work style to being at the latest in technology, the result will inevitably be an innovative business (one of those said to think “outside the box”). The issue is that this ability to see beyond allows it to find new solutions to the problems of a market.
Methods to Finance a Startup
Despite everything we’ve told you so far, there are times when a startup needs liquidity. It may be to start, consolidate, or take the final leap and become a benchmark in its sector. Whatever it is, your financing methods can also be very innovative when that time comes. Do you think a startup will talk to the director of a bank branch to ask for a loan? Maybe in some cases, yes, but the usual thing is that they opt for other systems
The literal translation of this concept would be “business angels”, and even though they do not have wings or live in the sky, the truth is that it is a pretty apt name. But what is a business angel? A person outside the Startup (at a professional and family level) believes that the project has a future and puts up their capital to help. But we are not only talking about money since it also brings valuable experience and contacts to speed up the process. Of course, all this in exchange for taking a piece of the cake.
Specialized Capital Funds
The world of startups is a world that offers excellent benefits. So much so that there are companies specialized in financing this type of business in exchange for part of the profits they make. They are like the angels we have told you about before, only instead of a person; they are companies. And depending on when they come into play, these names know them.
Despite what we have told you so far, startups go through a time when they do not receive benefits. It is usually a brief period, but it exists. The issue is that if a specialized fund sees a future in the business idea and contributes capital at this time, it is contributing what is known as seed capital. In most cases, it is not a very large investment (it does not usually exceed 50,000 euros), and they also provide knowledge, customer contacts and other aspects that can favour the “seed” to grow strong, healthy and above all quickly to obtain its “fruits”. ” as soon as possible.
Also known as venture capital in English, it consists of when a specialized fund is interested in a startup when it has already passed the initial stage, but investing in it still involves risk. The capital they contribute is much higher than in the previous point (so are their profits), but they can be the turning point for a startup to finish starting up and begin its consolidation process.
At this point, the Startup is already consolidated and can operate without needing external investment, but they do need it to expand their business. That’s when a fund offers them investment capital. A robust capital investment can position a startup as a world benchmark. In English, they are known as private equity.
The word startup refers to a company in the first phases of operations. Startups are founded by one or more entrepreneurs who want to grow a product or service for which they believe there is demand.