Startup (Meaning and Explanation)

We explain what a startup in the business world and what its characteristics are. In addition, we tell you how they are financed.

What is a startup?

In the business world, it is often called startup either start-up to emerging companies or startup companies, that is, to recently founded organizations that typically revolve around an entrepreneur and a small team of employees. These are usually companies that rely heavily on technology and are dedicated to innovation, in search of a profitable and rapidly growing business model.

This term of Anglo-Saxon origin (start-upliterally “start-up” or “start-up”) became popular at the beginning of the 21st century, when new communications and information technologies (ICT) inaugurated an important spectrum of business models, which created a niche that could be exploited by small companies, young and willing to continually reinvent themselves. Startup It must always be written in Spanish in italics, since it is a foreignism, that is, a loan from another language.

Many of the large contemporary technology companies, such as Facebook, Amazon or Google, were once startupsdedicated to a very specific niche of the services that the Internet makes possible. Each one proposed its particular capitalization model and its own business culture, breaking into the traditional way of doing business and establishing a market. This is why the startups They are often considered “disruptive” companies, that is, capable of revolutionizing the standards of their industry.

Characteristics of a startup

Broadly speaking, a startup It is characterized by the following:

are young companies that is, recently founded, with a limited history and number of personnel.
pursue accelerated growth margins through our own and innovative business models.
are in continuous reinvention and evolution, facing significant risk margins.
They have business structures that tend to be horizontal which revolve around the founders or entrepreneurs (who act as CEO).
They aim at marketing and distribution processes of products and services as agile and simple as possible.
have very modest operating costs compared to large companies.
use technology intensively and innovation to generate economies of scale.
They mostly recruit highly skilled workers within schemes of great business commitment and great rewards.
They pose dynamic work environments and unorthodox, such as teleworking.

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Importance of startup

The startups They represent an enthusiastic and thriving sector of the business world, willing to take risks, continually innovate and break established paradigms, which is why usually play a disruptive or vanguard role in society.

Although they are not large and multitudinous employers, nor large tax payers, the startups They often provide significant opportunities to the labor market especially in the field of highly qualified self-employed workers, and often through a decentralized business model, typical of the era of globalization and the internet. Few traditional companies run the same risk margin as one startup.

Financing of the startups

One of the great challenges of all startup It is to obtain sufficient financing to launch your operations and sustain them over time while achieving profitability and stability. In general, the sources of financing for these startups tend to be:

FFF (Friends, Family & Fools). These are people close to the social core of entrepreneurs (literally: “friends, family and naive people”), willing to invest in their ideas and often motivated by affection. Many of them are totally unrelated to the business world, but they act as initial investors when the project is too young to obtain any type of external financing.
Business angels (“Business Angels”). This name is known as private investors who play an initial guardian role in the company, not only providing capital but also knowledge, advice and certain support during the initial and take-off stages.
“Seed” capitals (Seed capitals). These are initial investments that do not seek immediate profitability, but rather are committed to the idea and model of the startup. They can come from larger companies, banks or other private investors.
Venture capital (Venture capital). This is the name given to investments that appear during the most advanced stages of the project, when its initial profitability has been proven. They tend to be larger, although there is still considerable risk, and are typically delivered in controlled rounds by banks and larger companies.

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Stages in the life of a startup

All startup complies with a “life cycle” or training process that involves the following stages:

Idea gestation. A group of people, usually a founder and some allies, organize themselves around an innovative business idea, and decide to make it a reality. In this initial stage, all those involved dedicate free time to the project, usually free of charge, until they achieve a minimum viable product that allows them to establish themselves as a commercial company.
Discovery. The startupalready organized around its basic idea, begins to offer itself to its eventual audience, usually through free plans, promotions and a lot of digital marketing. The idea is to make yourself known and amass a presence and a customer base large enough to test the model and subsequently launch a commercial version of the product on the market.
Validation. Once the startup obtains its presence in the market, begins to validate its monetization or capitalization strategies, in order to verify its scalability. Once your audience has grown significantly and your business model has been launched, the next phase begins.
Growth and penetration. The company is now seeking to establish itself in the target market, accommodate its investments and upfront expenses, and address increasingly high operating costs as a result of the expansion of its employee and worker base. An organizational structure emerges and soon the company is ready to stop being a startup.
Maturation. Once the company has more than 100 employees or a relevant turnover locally and internationally, or is listed on the stock exchange, it is ready to stop being considered a startup and can meet the obligations and commitments of a traditional organization.

When does a startup Does it stop being?

It is commonly considered that a startup has ceased to be so and has become part of the world of large companies, when:

The company quotes its shares in the local stock market.
The income of the company equal or exceed its expenses.
The staff In his charge he already works 8 hours a day exclusively in the company.
The absence of managers It does not interrupt the flow of the company at all.
The company stop being independent and is acquired by a larger group or consortium.
The company monopolizes a business niche and serves as an inspiration for other organizations that are beginning to compete.

Examples of startup

startup examples uala — Ualá is a *startup* that offers digital banking services.

Some examples of start-ups or startup from the beginning of the second decade of the 21st century are the following:

Kichink. Startup Mexican company that offers its clients virtual accounts for electronic commerce, charging a commission for operations. Its portal allows the purchase and sale of products in a secure, reliable and totally digital way, without having to face any monthly maintenance costs.
Uala. Startup Argentine digital banking services, which offers prepaid cards Mastercard international and other payment, purchase, collection and access to credit services through the internet.
Kaxan Media Group. Startup Mexican dedicated to the world of entertainment, focused on video games and broadcasts streaming of original content. Its success in recent years has been such that it has been authorized as a developer for renowned consoles such as PlayStation and Xbox.
Xubio. Startup Argentina that offers its clientele online management software for small and medium-sized businesses (SMEs) in Argentina, Colombia and Mexico. More than 50,000 companies are already managed through its services.
Wallapop. Startup Spanish company dedicated to the field of buying and selling second-hand objects through its internet platform, taking advantage of the geolocation services of its clients' cell phones. It is one of the startups most successful in his country.
Fair. Startup Mexican that offers itself as the “first supermarket without physical stores in Mexico.” Its web portal allows customers to make purchases without leaving home, working with different local SMEs as product suppliers.