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What is a startup?

Updated: Oct 4, 2022

In the modern world, terms like “startup”, “innovation”, and “investment” are heard more often. But do we really know what is a startup and how they work? Let’s see.

Startups are defined in various ways by different people. Perhaps, one of the most well-known definitions of a startup is from Eric Ries – the creator of the Lean Startup Methodology. He says: “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” However, the simplest way to understand the meaning of a startup is a young company that’s just beginning to develop.

How do startups work?

Actually, startups work like any other business companies: a group of people come together in order to develop a product that customers will need to buy. For this purpose, a startup should fit the right market. What differentiates a startup from other companies is the way of doing that. While other companies tend to go with the same template, a startup always aims to create a new one.

Another key point that distinguishes a startup from another company is speed and growth: startups tend to build their ideas and develop them faster. That’s why they oftentimes create a prototype of their product which is called MVP and test it.

Why are startups demanding?

We see startups being born and growing because of the increase in demand. But the reason for the increase is that startups tend to focus on a problem and offer a modern solution. Entrepreneurs oftentimes focus on helping society to move forward, however, more traditional ones are keen on maximizing the existing value.

What is the difference between startups and small businesses?

Generally, the focus area of the small businesses is sustainable growth, however, startups focus on the rapid growth.

How do startups succeed?

According to the statistics, 90 % of the startups fail. If you want your startup to succeed, you should always ask the questions below:

  • Is the team passionate about the idea? Of course, the team is as important as the validity of the idea. 40 % of the failure reasons depend on the irrelevance of the team.

  • Why this idea and why implement it now? Here you should think: are you the first one who came up with the idea? If yes, why it wasn’t implemented before? If not, what makes you unique?

  • How big is the market? Sometimes, the idea itself is relevant, however, the market isn’t that demanding. In such cases, startups don’t face success, because one of the most important things that keep the ecosystem vital is competitiveness. Make sure that you enter the right and proper market.


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