What is Startup Company?
What is Startup Company? A startup or launch is a new venture or company undertaken by an individual entrepreneur with the goal of seeking, developing, and ultimately validating a scalable online business model that can sustain itself over time. The term “startup” was first used in 1986 by economists J. restaurateur Brinkmann and C. Michael Bergerson.
There are many definitions of what is startup company. However, they all refer to the same concepts. For example, one definition of a traditional business is any undertaking, even a small one, that is undertaken with the expectation of achieving a specific goal. In this sense, the goal of traditional businesses is not necessarily to create long-term value for investors but rather to meet short-term monetary goals. This focus is what makes traditional businesses successful and oftentimes what makes them vulnerable to a failure because they are so focused on meeting immediate needs.
A startup company, by contrast, is focused on achieving long-term value for its investors. Thus, it is much more attentive to the long-term profits of the business. While this focus may drive the entrepreneur into a position of identifying and eliminating risks early on, it does not necessarily mean that the company will fail within the first year of operation. There are certainly risks involved in operating a traditional company while the focus is on short-term monetary goals; however, these risks do not generally carry the same degree of significance as the ones associated with a startup company.
Investing in startups presents many unique benefits to both entrepreneurs and venture capitalists. For example, a large portion of traditional business finance is directed toward large companies that generate significant market share through sales of a product or service that is in demand. Typically, small businesses do not generate a similar degree of customer demand. As a result, it is not uncommon for startups to seek funding from sources such as personal savings or personal credit lines. The lack of a direct market for the product or service created by the company leads to significant financing needs.
By contrast, a startup typically has very little risk associated with its operations. In many cases, there is no such thing as a “market” for a product or service. This lack of a direct market value creates significant funding opportunities for a company that is seeking venture capital.
Venture capital represents the life blood of any successful business venture. A venture capital firm invests in startups by providing them a significant amount of money in exchange for equity in the business. At the same time, a venture capital firm will look for a significant amount of tangible assets as part of its investment. Examples of tangible assets that are often used as part of venture capital investments include the founders’ work computer, signature black leather furniture, expensive cell phones, and related goods and services.
Seed financing represents the first step in obtaining venture capital for a startup company. Seed financing typically provides a funding source for a startup by providing seed money to fund the company’s operating costs. These costs typically include the payment of payroll to employees, office space, marketing and advertising expenses, and the cost of purchasing supplies. In some instances, seed money provided by family or friends may also be used to finance a startup company.
The final type of financing is angel investors. Angel investors invest in startups with the expectation that the founders will use the funds to generate a return on their investment. However, angels do not provide equity capital; instead, they provide specialized capital that is earmarked specifically for the purpose of providing a significant amount of funding to startups. Angel investors typically provide their cash support when a startup has not received any outside funding from venture capitalists or angel investors.