Probably, you are reading this because you have heard about start ups but you did not understand it or did not know what it was all about. As implicit from the name, a start-up is a business at its budding stage. It must not be a small business but any business whether small or big that is still at the initial level of trying to develop scalable or repeatable business model. A start-up is still at the phase of researching the market. It has not fully taken shape and yet it is competing with existing business.
The term start-up was widely used internationally when a greater percent of dot-com companies were established and that was during the period of dot-com bubble. As it has been said above, a start up is not the same with a small or medium business. It can come in various sizes. It can be a small or medium business, an organisation, a partnership or a company. The major defining characteristic is not the size but the newness of the business. This is why it is called a start-up.
The critical task facing a business at this initial stage is researching the market in order to come up with helpful business concepts or ideas and to discover more business opportunities to explore. The rate at which a company ceases to be a start depends largely on the rate at which it achieves this initial target. If it successful achieves the objective and overcomes the initial huddle facing every start-up, it will wear a new tag. A company therefore may become successful and ceases to be a start-up by being listed for public trading. It may at this level merges or be acquired by another big business entity. Another start up on the hand may fail to overcome this initial level and huddles and folds up completely. Put differently, the success of a start-up depends entirely on how it overcomes this initial stage.
Start ups get their funding in many ways. One of the ways through which start ups get funding is from investors. There are a number of individuals and families that invest their money heavily in start-up. The reason why start-ups attract the attention of investors more than established business is because they have high scalability potentials than well established business. This is because they have potentials of growing without hiring too many labours. They don’t require heavy capital and land in order to succeed.
Apart from individual investors, start ups can also get funding from venture capital firms. These are firms that are willing to sponsor another business or invest in another business. When they invest their money in start-ups, they become shareholders in the company and partake in the sharing of the company’s gain.
Factoring and crowd funding are other funding options available for start ups. However, there are a number of start ups that are sponsoring themselves at least at the initial stage before other people come in to help.