What is a startup company? Meaning, definition and characteristics of a startup

Startup definition
Startup company characteristics

Meaning, definition and characteristics of a startup company

3 guys started their startup journey from renting mattresses. Now they are a $10 billion company. Yes, talking about AirBnB, one of the most successful startups nowadays. Facebook, Uber, Twitter, Snapchat, Pinterest are also very well-known multi billionaire’s unicorn startups. So, a startup is now the talk of the town especially the young generation is very much interested in this word.

Before starting a successful startup, it is very important to know the meaning of startup, origin of startup and the definition of startup. Let’s break down the meaning, origin and definition of startup.

📃 Table of content

Startup meaning

Startup or start-up is a noun word and its plural startups or start-ups which means-

➤ the action of starting, and setting something in motion.

➤ a newly started business venture.

In the business sense, “startup” word was first used by Forbes magazine in 1976 but dated back to 1550 the term, “start-up” meaning upstart.

Startup is not just a word. Today, it's a dream for many optimistic people. In entrepreneurship, a startup has a broad definition. Let's grab the definition of startup company deeply-

What is a startup company?

A startup company is a fast growing and scalable business initiative by a person or group of people to solve a problem using modern technology.

Popular startup founders’ definitions:

“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”

         - Eric Ries, an entrepreneur and the author of The Lean Startup.

“A startup is a temporary organization designed to search for a business model that is repeatable and scalable.”

         - Steve Blank, Silicon Valley entrepreneur and business schools professor.

“A startup is an organization where individuals are working together towards a common goal, and that goal is usually highly innovative in nature.”

          - Alexandra Isenegger, Founder and CEO of Linkilaw.

Sacha Nitsetska, Founder and CEO of Mentorforward, defines startup in a very funniest way. She says, “A startup is a job you cannot quit, that does not pay, and which you cannot live without.”

As per Mark Winokur, Founder and CEO of Workforce First Aid and Safety, “The amazing thing about the term, “startup” is that it really has no defined boundaries.”

What classifies a company as a startup?

From the above startup definitions some key characteristics of a startup can be identified. Those are:

➤ Startup is a fresh and recently created company.

➤ Basically a startup company works on a single product or service.

➤ Startups need to be very innovative to make a differentiation from other companies.

➤ Quick growth rate needs after launching a startup.

➤ A small team building is very helpful for rapid growth.

➤ At the beginning of the experiment and learning process a startup has no hierarchy.

➤ Fundraising from investors like- Owners, Venture Capital, and Angel Investors is one of the major parts of a startup company to strengthen the financial resources.

➤ Best use of technology can move a startup company very easily.

➤ Startups deal with different uncertainties like- Market, Product resources, Competition, people and finances.

➤ A startup company works with high risk. Because of uncertainties and innovation, the failure rate is very high for a startup company.

➤ A dynamic startup company is able to adjust quickly with market changes, new technologies and competitive products.

Any startup or a business starts from a valuable idea. At first founders collect capital from friends/family or bank loans. After getting success they receive funding from the venture capitalist, angel investors or IPO. By investing an investor becomes the co-owner of the startup and receives a part of the company. 

There are multiple criteria to be a startup company. But Alex Wilhelm, TechCrunch writer, gives his own 50-100-500 rule. According to this rule if a company suits or exceeds any of these criteria, it will not be a startup anymore. 

        - $50 million revenue run rate

        - 100 or more employees

        - Worth more than $500 million

All business initiatives are not a startup company. There are some significant differences between startup VS large company and startup VS small business. Small businesses only focus on stability and profitability where startup companies arrange their business model with a unique product or service to grow fast with higher revenue.

That means a startup business is highly risky and full of uncertainties at the same time it is very innovative, repeatable, scalable, profitable and goal oriented.

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