One thing you can be absolutely sure of these days is that every entrepreneur has heard of the word Startup, but what are startups. Whether in the formal or informal environment, startups are based around emerging and innovative ideas or social or economic ventures with high growth potential and with a disruptive philosophy about the way they will be functioning in the market. A general idea to keep in mind is that a startup does not necessarily mean a company, but a moment in the life of a company where a team seeks to develop an innovative product or service that has a business model that is easily replicated and can scale without increasing significantly the costs. In other words, until becoming a truly so-called company, a startup must, first, go through a phase of experimentation regarding its market and its economic or business model.
What are Startups and how can we define them?
A startup is linked to the notion of trying a new activity, in a new market, with a risk that is difficult to assess. Silicon Valley -based American entrepreneur and innovative markets expert Steve Blank defines startups as a “temporary organization in search of a business model that can industrialize, be profitable, and allow for growth.” There is, as previously mentioned, a fundamental difference between a company and a startup, as the company seeks to optimize as existent business model and make the most out of it to support its costs and remunerate its shareholders. The startup tests its business model and tests its operability in the market. A start-up is not yet a company as you might imagine, with a well-established organization, marketing a product or service in a perfectly identified market. The innovative nature of its offer and its economic model do not make it possible to clearly define all the components of its market and ensure immediate profitability.
Typically, three predictable scenarios occur for an intermediate-stage startup, before becoming a company, and by the end of the experimentation phase, the startup can scale to become a traditional company with an established business model, or it can be acquired, in whole or in part, by a larger company, or disappear due to lack of money, investments or long-term sustainable operations in the markets.
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How to transform a Startup in a company with potential
Five elements are critical to transforming a startup from a potential idea to an established company. These elements have to do with the team and its functioning, the business strategies or market approaches and the skills of each of those involved in the project:
The team and the network
A startup is made, above all, by a determined, ambitious and complementary team. At the same time, it must be made up of a personal network of specialists who can provide support during the key moments of its development, thus allowing each one to operate efficiently in what is needed .
The economic model and supply
For a quick and safe take-off of a startup, the innovative nature of the product, service or economic model is paramount. In the long run, it should allow for a competitive advantage to be gained. Furthermore, the implementation of the activity must guarantee economies of scale.
The market and the strategy
Assessing the size and trend of the market is essential to reveal whether or not there is considerable potential, in terms of revenue, for the project in which you intend to invest. One of the steps is to understand if the product or service is intended for a specific niche or for the masses and, in this way, establish strategies that can meet the existing type of ambition.
Scalability
Scalability refers to the ability to adapt your business model, your business plan to a strong increase in your volume of activities, without the need for a large increase in your structure to function. This means that for a startup to grow, it must create conditions to add value to its business and meet customer demands without significantly increasing its costs, thus enabling an increase in its profits.
Be the center of attention
To raise its level, a startup needs to attract as many users as possible and get people talking about the initiative and its activity.
More important than knowing what Startups are, will be knowing how they can be successful…
The startup is looking for a way to monetize its activity in the long term and above all to grow its revenues exponentially to reach the maturity of a large company. Whatever the sector of activity , there are three conditions that indicate the potential of a successful startup: a) The prospect of strong growth; b) the use of new technologies and; c) the need for significant funding.
Previously, the power of large corporations was based on their size and financial capacity. The biggest companies captured the smallest. Now are the faster ones that absorb the slower ones and that’s the philosophy behind the success of startups. Anyway, here are some recommendations for those who want to see their startup take off with speed and safety:
Test the market:
Much research will be needed to understand the workings of the market, its environment and its customers. This process will make it possible to adapt to the changes that may arise and also to adapt to existing technologies. In addition, it is necessary to create a database of potential customers and improve the product whenever necessary, until finding what works best for the market.
Evolve the business model
It is common to start a startup with an initial business model and only succeed with a completely different economic model. This means an evolution, and it can apply not only to the business model, but also to the technology employed, the product, the target customers or the distribution method. Changing just one of these variables will impact the initial business model, with all the resulting structural consequences.
Learn from mistakes
The evolution of your economic model can give you a large number of indicators about the new directions to take in your business. Tests and more tests allow us to identify possible errors and areas for improvement regarding the product or the business model itself. Customer feedback, often done in real time, also makes it possible to further shape the product or service.
In summary, a startup is a social or economic initiative that is based on an agile business model , in accelerated growth and innovative solutions. One of the great differentials of startups is to bring a product or service that generates value for consumers , as well as the possibility of a scalable business. More than generating profits, startups also increase competitiveness in the markets, making large companies have to rethink their processes, invest in technology and remodel their strategies.
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