Start-up tips and Guide - 5 Things You Should Know About Startups
.png)
A Startup (or Start-up) is a new business that has or plans to introduce a new product or service into the marketplace. Although a Startup is a business or company, not all businesses or companies can be considered a startup. For a business to be called a Startup, it must fulfil two conditions and these are;
- Growth: It must have a new product or service (a product or service which is not yet available)
- Innovation: A startup has the potential to grow exponentially rather than linearly. It’s scalable. To do this, it must have a market where it will sell its product or service
It quickly becomes clear that the challenges of a Startup are quite unique from that of most businesses. But that’s not all, here are more unique characteristics of Startups that you should know.
1. The term Startup is only used for businesses in specific industries
Startup is not attributed to just any business or industry. There are specific industries where a new business can be recognized as a startup. These include technology, Software as a service (SaaS), eCommerce and Consumer goods, Financial technology and healthcare. Also, a Startup may function in just one of these industries or several of them at the same time. For example, a tech startup could develop a new product or service that targets the healthcare or financial market.
2. A Startup aims to address specific problems within the target market
A Startup could venture into any industry mentioned above and by doing so, such industry becomes its target market. But unlike most other businesses, a Startup proposes a new idea, one that occupies a unique position in the target market and solves a particular problem. Because of its unique position, Startups can be profitable even in a highly competitive market.
3. Investors are the LifeBlood of every Startup
By their nature, Startups are often not profitable during the first few years of their existence. It could take anywhere between 5 to 10 years for a Startup to become profitable. As such, they are heavily dependent on investor funding until they become profitable. Failure to find investors who are willing to fund the business means a certain death. However, not all Startups take so long to become profitable, a few may take less than 5 years but these are the exceptions.
4. Startups need to grow up fast
Just like they need to become profitable as quickly as possible, Startups need to grow up fast as well. This is often referred to as “Scale-up”. A Scale-up is a Startup that has met certain minimum requirements, one of which is that it must be viable. Viability means that the Startup is now generating enough revenue to pay for the cost of its operation. For this to happen, a Startup must have an established business model and already commercialised its product or service. According to the OECD, a Startup should;
- Have an average annual growth in employment or revenue of more than 20% in the last 3 years
- Have at least 10 employees
When all the right boxes are checked, a Startup can then be considered a “high-growth firm” aka a Scaleup.
5. Prospect of a Startup
As a founder or a future founder of a Startup, you may find yourself thinking about the future prospects of your Startup. This is perfectly normal being that there are a lot of “what ifs” involved. However, you should know that there aren't so many options available for a Startup. A Startup typically has three options - Scaleup, Go bankrupt or Merge with a bigger company. While mergers are a common theme, it means relinquishing control of your Startup to the larger company. The other alternative is to Scaleup and if you don’t know how to get your business to Scaleup, then visit our website and we will be happy to help.
Final note to founders and entrepreneurs
Running a Startup may seem like a daunting task and yes it is. But there are a few steps to follow to increase your chances of success and these are;
- Have an idea
- Find a niche industry or target market
- Develop a business model
- Attract investors and get funded
- Scaleup
While the first few steps can easily be accomplished with research and market surveys, the later steps require more than that. You need access to resources, connections and information to help you stay afloat. At Epirus Ventures, we do all these and much more. Not only do we provide you with the resources and connections you need, we bring a hands-on-approach that means guiding you all through your entrepreneurial journey because we believe in YOU. This is what sets us apart. To know more about Epirus Ventures visit our website on https://www.epirus.vc/.
FAQs: Start-up tips and Guide - 5 Things You Should Know About Startups
A business is considered a startup if it satisfies two key conditions: 1. **Growth Potential**: It introduces a new, innovative product or service that is not yet available in the market. 2. **Scalability**: It must have the potential to grow exponentially rather than linearly, meaning its business model is designed to scale quickly and effectively address large markets.
Startups are often linked to specific industries that foster innovation and scalability. Common industries include: - Technology - Software as a Service (SaaS) - eCommerce and Consumer goods - Financial technology (FinTech) - Healthcare These industries enable startups to introduce groundbreaking products or services, often addressing niche market problems.
Startups typically do not generate profits during their initial years due to high operating costs and ongoing product development. Investor funding is critical for: - Covering operational expenses. - Supporting research, development, and market expansion efforts. - Sustaining business growth until it achieves profitability. Without adequate investor backing, many startups are unable to survive these early stages.
A scalable startup operates with a business model that allows it to grow revenue dramatically without a corresponding increase in operating costs. For scalability, a startup must: - Target a large addressable market. - Leverage technology to expand efficiently. - Maintain low marginal costs. For example, SaaS startups often achieve scalability by serving a vast number of customers with relatively low additional operating costs.
Startups typically focus on solving specific, well-defined problems within their target market. They achieve this by: - Offering innovative products or services that are unique to existing solutions. - Creating value for customers through cost savings, convenience, or improved functionality. This approach often allows startups to thrive even in industries with high competition.
On average, it can take 5 to 10 years for a startup to achieve profitability. However, some startups may reach profitability sooner, particularly if they: - Operate in high-demand markets. - Control costs effectively. - Secure substantial investor funding early on. Exceptions exist, but startups must plan for several years of financial dependency on external funding.
A startup transitions to a scaleup when it meets several criteria, indicating it has grown beyond its early stages. Key indicators of a scaleup include: - Viability: Generating enough revenue to cover operational costs. - High Growth: Annual employment or revenue growth exceeding 20% over the past three years. - Workforce: Employing at least 10 full-time employees. A scaleup is essentially a high-growth startup that has achieved market validation and financial sustainability.
Founders face unique challenges, including: - Securing investor funding to sustain early operations. - Establishing a strong business model that balances innovation with market demand. - Achieving growth and scalability in competitive markets. - Managing resources effectively, including limited cash flow and human capital. Successfully navigating these challenges is critical to survival and long-term success.
A startup typically has three potential paths: 1. **Scaleup**: Achieving growth and profitability to transition into a high-growth firm. 2. **Bankruptcy**: Failing to achieve viability or secure necessary funding. 3. **Merger or Acquisition**: Joining a larger company, either to access more resources or as an exit strategy. Each outcome depends on the startup's strategic decisions and market performance.
Entrepreneurs can improve their chances by following these steps: 1. Develop a compelling and innovative idea. 2. Identify a niche target market and validate product demand through research. 3. Create a scalable and sustainable business model. 4. Establish strong investor relationships to secure funding. 5. Prioritize growth by scaling operations and commercializing products effectively. Partnering with experts like Epirus Ventures can provide startups with essential resources, connections, and guidance to navigate these stages successfully.
Weekly
Newsletter.
