STARTUP

Startup company sometimes also known as upstart, refers as a young company established by one or more
entrepreneurs to create unique and irreplaceable products or services for which they believe there is demand.

The term emerged to describe and identify a new or early-stage company with higher than usual growth
potential due technology it was developing. This meant that for that growth potential to be possible, it was
relaying to new technology and since 1990’s also to internet as the high growth enabling factor. These startups
were known as internet startups or more broadly technology startups, and as such the term “startup” is still
mainly referred as “technology startup”.

Types of Startups

There are six types of startups, these are the following:

1. Scalable startups. These are businesses that begin on a small scale but later grow with consistent
naturing by allowing outside investors to chip in. Companies in a tech niche often belong to this group.
Since technology companies often have great potential, they can easily access the global market. Tech
businesses can receive financial support from investors and grow into international companies.
Examples of such startups include Google, Uber, Facebook, and Twitter. These startups hire the best
workers and search for investors to boost the development of their ideas and scale.

2. Small business startups. These businesses are created by regular people and are self-funded. They
grow at their own pace and usually have a good site but don’t have an app. Grocery stores,
hairdressers, bakers, and travel agents are the perfect examples.

3. Lifestyle startups. A lifestyle business is often (but not always) a hobby that has become a source of
reliable income. Some examples include blogging, photography, writing, teaching, cooking, or training.
People who have hobbies and are eager to work on their passion can create a lifestyle startup. They
can make a living by doing what they love. We can see a lot of examples of lifestyle startups. Let’s take
dancers, for instance. They actively open online dance schools to teach children and adults to dance
and earn money this way.

4. Buyable startups. In the technology and software industry, some people design a startup from scratch
to sell it to a bigger company later. Giants like Amazon and Uber buy small startups to develop them
over time and receive benefits.

5. Offshoot startups. These are companies that branch off from bigger corporations. An offshoot startup
is fairly self-explanatory. Simply put, they are startups that branch off from larger parent companies to
become their own entities.
 6. Social startups. These startups exist despite the general belief that the main aim of all startups is to
earn money. There are still companies designed to do good for other people, and they are called social
startups. Examples include charities and non-profit organizations that exist thanks to donations. For
instance, Code.org, a non-profit organization, encourages school students in the US to learn computer
science.

RAISING CAPITAL FOR ENTREPRENEURIAL PATH

One of the most important steps is obtaining funding. Most of these companies are initially funded by their
founders including their family and friends or a loan. However, these companies generally start with high costs
and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.

According to Investopedia, a venture capitalist (VC) is a private equity investor that provides capital to
companies with high growth potential in exchange for an equity stake. This could be funding startup ventures
or supporting small companies that wish to expand but do not have access to equities markets.

Startups can use seed capital to invest in research and to develop their business plans. Market research helps
determine the demand for a product or service, while a comprehensive business plan outlines the
company's mission statement, vision, and goals, as well as management and marketing strategies.

This primarily applies to the success and longevity of a startup. New businesses need to prove themselves and
raise capital before they can start turning a profit. Keeping investors happy with the startup's progress is
critical. The risk of shutting down or not having enough capital to continue operations before turning a profit is
ever-present.

Overcoming these major obstacles can help startups avoid failure and work towards a path of healthy growth.

Managing early growth

Once the startup company starting to succeed, there’s a need in managing rapid growth and establishing
formal management practices. These set of changes is often termed the transition from entrepreneurial to
professional management. This part only begins to address the issues that startups must deal with in making
the transition.

The growth of any new business venture is a product of both the opportunity selection and management
factors. The true mark of a good venture is how it manages growth and whether it can sustain it. Centralized
decision making and informal controls characterize entrepreneurial management. In startups, one person can
comprehend all the information required for decision making and there is little need for formal procedures. The
venture is small enough that business activity can be monitored via the supervision of the entrepreneur. The
ventures that survive the growth phase have a disciplined team with intellectual honesty; they know what they
know and do not know.

Coordinating profitable, rapid growth requires a detailed plan and budget. Also, employees who are capable of
delivering the desired outcomes in the growth plan must be hired. Entrepreneurs of startups should know that it
is never too late to start developing smart tactics/practices for finding workers. Startups must be prepared, as
they enter the battle for talented workers, with a plan, creative compensation packages, capital budgets with
room for human capital investment, and other powerful strategic weaponry. Just as the most successful startup
ventures have business plans, operational or manufacturing plans, and financial plans, companies that grow to
the next level, breaking through the growth wall, also have internal plans for expansion.

THE 5 MOST COMMON FUNDING SOURCES

1. Personal Savings

Funding from personal savings is the most common type of funding for small businesses. The two issues with
this type of funding are 1) how much personal savings you have and 2) how much personal savings are you
willing to risk.

In many cases, entrepreneurs and business owners prefer OPM, or “other people’s money.” The four funding
sources below are all OPM sources.

2. Business Loans

Debt financing is a fancy way of saying “loan.” Credit unions and banks offer funding that you must repay over
time with interest. This can come in the form of a personal loan, a traditional business loan, or different loans
based on the type of asset you need to purchase (e.g., for equipment, land, or vehicles).

You must prove to the lender that the likelihood of you paying back the bank loans is high, and meet any
requirements they have (e.g., having collateral in some cases). With a bank loan, you do not need to give up
equity. However, once again, you will have to pay interest along with the principal.

3. Friends & Family

A big source of funding for entrepreneurs is friends and family. They can provide funding in the form of debt
(you must pay it back), equity (they get shares in your company), or even a hybrid (e.g., a royalty whereby they
get paid back via a percentage of your sales).
Friends and family are a great source of funding since they generally trust you and are easier to convince than
strangers. However, there is the risk of losing their money. And you must consider how your relationship with
them might suffer if this happens.

4. Angel Investors

Angel investors are generally wealthy individuals like friends and family members; you just don’t know them
(yet). At present, there are about 250,000 private angel investors in the United States that fund more than
30,000 small businesses each year. Most of these angel investors are not members of angel groups. Rather
they are business owners, executives and/or other successful individuals that have the means and ability to
fund deals that are presented to them and which they find interesting.

Networking is a great way to find an angel investor for your business.

5. Venture Capital

Venture capital funding is a suitable option for businesses that are beyond the startup period, as well as those
who need a larger amount of venture capital for expansion and increasing market share. Venture capitalists
and VC firms are professional investors that are more involved with business management, and they play a
significant role in setting milestones, targets, and giving advice on how to ensure greater success.

Venture capitalists invest in new businesses and medium-sized businesses they believe are likely to go public
or be sold for massive future business profits. Specifically, they want to fund companies that have the ability to
be valued at $100 million or more within five years. They also go through an expensive and lengthy process of
deciding on the best business to invest their venture funds. Hence, the application process and approval
usually takes several months.