In recent years, the term 'startup' (start-up company) has become very fashionable and it is common for many media outlets to use it without knowing very well what it means. At the same time, there are many companies that appropriate it to appear more interesting or to capture the attention of journalists or their potential clients.
How do you know if a company is a startup or not? How to separate the grain from the chaff? There are several aspects or elements that can guide us. The first one refers to the life of these companies. By definition, a startup is a young company that doesn't have many years of experience behind it. There is no established time limit to stop being one, but it is revealing to know that only 2 out of 10 startups exceed 5 years of life and overcome the so-called 'death valley'. Can you be a young company without being a startup? Of course it is. There are many SMEs that have a short track record and are. In this case, there is another thing that sets them apart. Since its creation, the startup has been designed to have great scalability, that is, to have exponential growth in a short time. In this sense, there is a model of funding rounds to which entrepreneurs aspire from time to time, to give great impetus to their projects. The objective is to get more money in each round to improve technology, expand the workforce, open up to other markets, etc. and increase their valuation also for the outside world. Of course, the term 'startup' is associated with the technological world. So emerging companies, to be so, must present some disruption or embrace models based on digital or mobile. The innovation component must be present in them in some way, even if your business involves imitating another one that already exists.
Agility to make decisions, another differential aspect
Unlike traditional companies or SMEs, startups work with agile processes, which lead them to make decisions and make changes in a short time to adapt to what their customers or the market demand. This can lead them to completely change their scope of action or business model, something unthinkable in an SME. On the other hand, a startup is a company that is mainly financed by private capital, that is, it has not been listed on the stock exchange or submitted a Public Offer for Sale. When an emerging company steps on the parquet floor and starts trading, it would no longer be considered a startup ipso facto. In the same way, something similar could happen when there is a startup that is acquired by a corporate giant or a merger occurs. From that moment on, it went on to have another category and become a mere division of a large company, despite operating with some independence or operating with the same processes as before. If you have any questions left, you can take a look at the book 'The Startup Way' by Eric Ries. This author identifies 5 aspects inherent to emerging companies: permanent innovation, agility in acting, continuous exploration of new business models, reinvention at some point in their history and constant transformation.
