Startup

economic-dictionary

A startup is a recently created small company, with high innovative and technological potential, where its model is scalable and its growth can be exponential.

In its translation from English, the term start-up means “start up”. And, indeed, we can define it as the initial period of a company, the beginning or start of a new business.

See advantages and disadvantages of working in a startup

Startup characteristics

Startups have a series of differentiating elements that explain their nature:

  • Temporary nature: The startup as an organization is limited in nature. In other words, it refers to the emergence of a company that ends with its conversion into a stable business. In other cases, the ending is just the opposite. In other words, they disappear (there are not a few startups that fail).
  • Novelty: Innovation is the essence of every startup. Often referred to its strong link with new technologies and the internet world. A novelty that always represents a competitive advantage over other companies. And that, in addition, can also be applied to the differential nature of your business or the production processes you use.
  • Reduced costs: Their connection with ICT makes these young companies a very attractive business. In its initial stages it does not require large amounts of money for its start-up. Unlike, of course, companies that operate in other areas.
  • External financing: Although start-up costs are minimal, in the medium term the startup's profits are considerable. As a result of this accelerated growth, many external investors are attracted. These investors are known as Angel Investors (Business Angel). They provide a small financing in exchange for shares or participations in the company.
  • Objective and risks: Startups assume a strong risk since their objective is to dominate a market niche (often little explored) in which they work based on hypotheses. This area of ​​uncertainty requires a great capacity to adapt to changes. The goal, therefore, consists of making these hypotheses work, that the products or services offered are accepted by their clients, maintaining high profits that allow them to return the investment (guaranteeing the scalability of the business).

Many of these emerging companies disappear within a short time of life or are sold before finding a stable business model. However, there are notable examples of companies that have prospered, becoming benchmark businesses (this would be the case of Google, Facebook, etc.). Although the issue is subject to strong controversies, for many the transition from a startup to a business model repeatable and scalable means the end of the startup itself, which becomes the classic company as we know it.

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