In the last few years the term startup has become fashionable to refer to those companies that take their first steps, usually in the field of digital technologies. But do you know exactly what a startup is, how they arise and what types of startups exist? Do you know how a startup differs from an SME? How does the startup business model work? If you want to know more about it, here we will explain it in detail.
Contenido del artículo
- What is a startup? Differences between an SME and a startup
- Startup history
- How to start a startup?
- What are the main types of startups?
What is a startup? Differences between an SME and a startup
When someone is asked what a start up is, they usually answer that it is a small company created a short time ago. But this is not quite correct. Properly speaking, we can say that a start up is a company with little trajectory, small dimensions and a great potential for growth.
But isn’t this the same as a SME? No, because SME means small and medium-sized company, which only implies the size of the business. It is true that a startup has no choice but to be small, because it is just starting out in the turbulent waters of the market. But it can become gigantic over time. An SME, however, can be in business for years and still be small or medium-sized.
this is why the term scalability is so important when we distinguish between SMEs and start-ups. And it is that the latter have a great potential for scalability. That is, the ability to obtain their first profits in a short time and grow quickly.
Another aspect that characterizes a start up is the investment. While other types of companies start with a considerable fund, startups are launched to the market with capital needs and are constantly looking for funding. To do so, they often turn to digital technologies, which is why the startup business model is closely linked to the Internet. And, for the same reason, they tend to play with minimal costs compared to profits.
Let’s see then, by way of summary, the 5 characteristics that distinguish a start up from any other kind of company:
- early age
- search for investment
- relationship with digital technologies
- minimization of costs
You can be sure that, if a company meets these requirements, it is a startup.
You could almost say that startups are a movement, an entrepreneurial culture that boomed in the 2008 crisis. But the history of startups actually dates back to the 1970s. At a time when computing was in its infancy, names like Microsoft, Apple and Seagate suddenly emerged, true startups that, among many others, ended up being pillars of the modern world.
It was then that small entrepreneurs, inspired by those feats, began to bet everything for everything in the field of technological innovation. Over the next decades, companies like Amazon, AOL, Dell, Lenovo, Yahoo!, eBay, Netflix, Google, Facebook, etc. would emerge. All of them started with a small team, sometimes only 2 people, and very little money.
But it wasn’t until 2008 that startups became a real paradigm in the wake of the economic crisis. In the absence of funds, many entrepreneurs took a risk with a dream in search of investment. Some of the startups born that same year were Uber, Airbnb and Spotify, just to name a few. The ground was ready for the startup business model, as the development of the Internet began to offer possibilities that were unthinkable in other times.
How to start a startup?
The first thing to say is that there is no recipe book for a start up business model. Unlike traditional companies, in the game of startups the arbitrary dynamics of the market prevails. It’s about building a scalable and lucrative business among a tangle of competitors that make it difficult for you to succeed. And, moreover, without sufficient funds to start with everything you need. But there are certain guidelines that successful entrepreneurs have followed. Let’s see what they are.
Look for problems to solve
They say that necessity is the mother of invention. And the best way to create an innovative product with great social utility, is to start investigating what are the problems that have not been solved in a particular sector, or what can be improved by providing creative solutions.
Think scalable solutions
But a great idea is not enough. For the startup to grow, it needs to be scalable. That is, with a real potential for growth and profit without large investments. This is important, because if the solution offered exceeds the investors’ proposals, you won’t even be able to get started. Or maybe you can, but if it is too expensive, the cost-benefit ratio will slow down the company’s growth.
Short, medium and long term goals
The pursuit of investment and profit cannot be the only thing. You need to map out a short, medium and long term path that directs your actions in a scalable direction. If you don’t set clear and realistic goals, your startup could run the risk of remaining an SME or failing. In planning, you should also consider the possible changes and innovations that may occur in the market in the coming years.
Look for investment!
It goes without saying: seeking investment is vital. Unless you have the necessary funds to get off the ground, you will have to spend time and effort in the beginning looking for and convincing potential investors. And you may even need to keep expanding your network of investors to ensure growth once you’ve started your business. A good way to start, you can resort to crowdfunding or go to companies interested in crowlending.
Technology is your best friend
To a large extent, the quality of the products and services that companies provide today depends on the technological support they have. Therefore, you should turn to the best technologies to optimize not only your business solutions, but the processes of your startup.
Advertising at all costs
If there is one thing a newborn company needs, it is publicity. Therefore, as a startup, your main battlefield is on the Internet. That’s why you should use all the necessary means to make yourself visible: blog, web portal, social media accounts, email marketing, SEO/SEM strategies, etc. And, as far as possible, you should also use traditional media such as radio, television and public spaces.
What are the main types of startups?
The fact that startups are a relatively new phenomenon and do not obey rigid schemes, makes them very difficult to categorize. As a result, there is no single correct classification for startups, and there are many different opinions. Let’s see, therefore, the ones offered by 3 important organizations dedicated to the research and development of startups.
4 types of startup according to Startup Gnome Project
According to the reports of Startup Gnome Project, dedicated to study and unravel the mysteries of startups, these can be classified into 4 types:
- Automator: They tend to automate everything and optimize processes to their minimum expression. They are also distinguished by the fact that their strategies focus equally on the product and the consumer, and they acquire customers autonomously.
- Social transformer: They are characterised by an uncontrolled drive to fill the market in all possible areas, instead of focusing on a single target. As a result, customer acquisition is exponential and sometimes even chaotic. To achieve this, they often play with innovative ways of creating user experience and very sophisticated interaction processes.
- Integrator: A bit old style, integrator startups have small markets. However, they have early investment, set clear goals and are focused on the product. They take every innovation in online consumer technologies and remake it in their own way, usually to provide it to small third-party companies.
- Challenger: A sort of David versus Goliath. These small businesses often take risks to provide products and services to large companies. With a heavy reliance on clientele, they focus on specific markets and employ successful sales processes that are repeatable.
6 types of startups by Renderforest
Renderforest, for its part, considers 6 fundamental types of startups, based on the objectives that distinguish them from their launch. Thus we have the startups created to:
- Innovate: They are launched by large companies interested in adopting a startup business model to generate new revenue. That is why they are also called Startups of Big Companies.
- Make a difference: Also known as Social Entrepreneurs, they aim to make the world a better place. That’s why some are non-profit organizations, while others do seek profits but not as their main goal.
- To be sold:Sellable Startups arise with the desire that large companies are interested in acquiring them. Therefore, they focus on creating a technological product or service that is innovative enough to attract the attention of major suppliers.
- Grow without pause: These are the famous Scalable Startups, and the ones we usually think of when we hear the word startup. All their paradigms and actions are focused on growing constantly and finding investors to finance their activities.
- Meet the founder’s need: They arise from the founder’s monetary need. They are called SME Startups because they start from proven business models and do not have to enter the technological field. For example, a small comic book store or a candy store are included in this classification.
- Working on a passion: Unlike the previous ones, these startups arise not out of necessity, but out of passion. It’s about creating a company that allows you to dedicate yourself to what you like to do the most. That is, in addition to profits, they seek personal fulfillment. They are often called Lifestyle Startups or Lifestyle Startups.
5 types of startups according to Startupxplore
SturtupExplore is a huge Spanish community of startups and investors that has also classified these small companies, but in this case by the sector in which they operate.
- Fintech: They arise with the purpose of making up for the shortcomings of traditional banking through new technologies. In this way, they offer new ways to manage financial procedures through the Internet and mobile telephony, facilitate crowdfunding projects, crowdlending, etc.
- Internet of Things (IoT): They are dedicated to the growing sector of the Internet of Things (Internet of Things), which seeks to interconnect and give intelligence to all objects of everyday life. So these startups specialize in home automation, wireless technologies, micro-electromechanical systems, online microservices and many other developments in this field.
- eHealth or Lifestyle: They base their goals on the creation of health and lifestyle apps and websites, as well as medical devices and even biotech solutions. Currently this sector is in rapid development and every day more and more companies are betting on technology in terms of human welfare.
- Big Data: In this era more information is stored and exchanged than the human being can process. Therefore, increasingly sophisticated solutions are required for data management. This is where many entrepreneurs see an opportunity and offer tools and services for data mining, artificial intelligence, geolocation, etc.
- Ecommerce:And of course, of course, start-ups focused on online sales, marketing and advertising. The ecommerce sector, although it remains stable without big jumps, is always an investment opportunity that promises great benefits.