As an entrepreneur or a business person, a startup should be something that you have vast knowledge about. However, in some cases, you might not know everything there is to know about Startups. What is a start up, and the types of startups.
Therefore, a thorough explanation of this concept and its types will be provided in this discussion.
So, without further ado, let’s discuss startups, what is a start up, and types of startups.
What Is a Start up? – Startups. What Is a Start Up. Types of Startups
A start up is defined as a young company or business founded to create a service or a product that has demands to be met.
The services or products of startups are usually irreplaceable and irresistible to customers.
As a result, it often meets the demand that they were created for.
Startups are rooted in creativity and innovation as they aim to improve existing services or products or develop a new category of service and products.
They disrupt the general way of performing, and thinking in the business industries they are found in.
This is why they most of them are referred to as “disruptors” in their respective sectors.
A start up can be started by one entrepreneur or more than one entrepreneur.
Some great examples of startups in Tech are Google, Netflix, Facebook, Apple, and Amazon.
How Do Startups Operate? – Startups. What Is a Start Up. Types of Startups
Startups generally work like other companies and business in the sense that their workforce work to develop products and services which customers will purchase.
However, the difference between startups and other companies is seen in the way they go about doing this.
Regular businesses or companies work based on existing rules of how businesses should operate.
They do this by duplicating existing services and products.
In other words, they don’t create anything new.
On the other hand, startups work to create a new template.
They do something new or make existing things better.
For example, a business owner might expand their business by franchising an existing eatery or restaurant.
Whereas, an entrepreneur will not only franchise an existing eatery but provide choices and convenience such as meal kits that most sit-down restaurants don’t provide.
This way, their delivery service will reach more people than when the business is left as just a sit-down.
The new addition makes the difference.
Another thing that differentiates startups from regular businesses and companies is their need for growth and speed.
They aim to quickly build on their ideas and watch them grow.
So, they often undergo a process referred to as iteration.
This process is all about a continuous improvement of products through usage data and feedback.
They take note of the customer’s feedback and work to enhance their products based on that.
While startups work to enhance their product, they also look for ways to rapidly increase their customer or client base.
When they increase their customer base, it helps them to get more market shares.
As a result, they can raise more funds to grow their services or products, and also get more audience.
Their innovation and rapid growth whether explicitly or implicitly are aimed at ensuring that they go public.
How Do Startups Get Funded? – Startups. What Is a Start Up. Types of Startups
Most startups get funded through a series of funding rounds that include:
This is the term used to refer to when an entrepreneur makes use of their savings and resources, and that of their friends and family to begin their venture.
They don’t make use of external input from investors.
Bootstrapping is often referred to be a self-starting method of raising funds for a business.
This means of fundraising is considered to be the preliminary round of fundraising for startups.
Seed Funding – Startups. What Is a Start Up. Types of Startups
After bootstrapping, the next round of fundraising is seed funding.
This is where affluent people referred to as “angel investors” step in to invest in the early stage of the business or company.
These angel investors know that the startup already has equity.
So, they invest both money and strategic support to the startup to ensure growth in exchange for ownership equity.
Series A, B, and C Funding
The next round of fund-raising after seed funding is the series A, B, and C funding.
The organization that leads this round of funding are called venture capital firms.
By the time they step in, they know that the business has grown to a considerable height and just needs more funding to expand its goals and operations.
So, they step in to invest hundred or tens of millions into the venture.
And of course, they invest in exchange for equity in the company.
Open Funding – Startups. What Is a Start Up. Types of Startups
This round only occurs when a startup decides to be recognized as a public business or company.
If this happens, they open up to receive money outside through an initial public offering (IPO)
An IPO is a process that allows a private company to get more money by offering shares to the public who in turn gets a good return on their investment.
So, it is considered to be a win-win for the startup and the investors.
Furthermore, startup founders can use this opportunity to leave the business while realizing their investment’s full profit.
The 6 Types of Startups – Startups. What Is a Start Up. Types of Startups
There are different types of startups.
Understanding these different types of startups will help you to know which to go for if you decide to have a startup.
So, let’s take a look at them:
1. Lifestyle Startups
These are startups that are founded because of a passion a person or group of people has for a hobby or out of a desire for independence.
Lifestyle startup founders are usually eager to build their favorite activity or hobby into a business.
Hence, they readily put in their energy and time to do this.
Lifestyle startup ranges through several things.
For example, a dancer can decide to make a business out of their passion and start an online dancing class.
Or a passionate traveler can decide to start a tour guiding venture.
The type of business a founder of a lifestyle business starts depends on whatever they are passionate about.
So, it can be anything.
How To Know If A Lifestyle Startup Is Suitable For You – Startups. What Is a Start Up. Types of Startups
You might be thinking about starting a lifestyle startup.
However, before you venture into this business, you need to know if it is for you.
Here are a few questions that can serve as pointers for you to know if you can engage in a lifestyle startup:
Do You Have a Hobby You are Passionate About?
Lifestyle startup is all about having a hobby you are passionate about.
So, this question should be the first thing you should ask yourself if you are considering starting a lifestyle startup.
You need to have a hobby that you are so passionate about that you don’t mind doing all day.
If you don’t have one like this, then maybe starting a lifestyle startup might not be for you.
Are You Disciplined and Self-Motivated? – Startups. What Is a Start Up. Types of Startups
To start a lifestyle you need to be disciplined and self-motivated.
This is because, you will have to be your boss, and if you cannot challenge yourself to do the things you ought to push your business, you might likely fail.
Furthermore, you should know that not everybody will support and encourage a person when they set out to start a lifestyle startup.
This is mostly because people who start lifestyle startups are people who are passionate about what they do, and not a lot of people understand this.
Hence, when they want to make their hobby or activity into a business, they most likely will get some discouragements.
Therefore, to forge on regardless of what other people say, you need to be self-motivated to venture into the business.
2. Scalable Startups – Startups. What Is a Start Up. Types of Startups
This type of startups makes use of unique concepts and ideas to speedily grow a business that will produce the highest possible investment returns.
It is mostly found in the technology sector.
To start a scalable startup, one has to conduct thorough research on the market to discover exploitable market potentials or opportunities.
They also require a huge amount of money to build the business to its greatest height.
Therefore, this type of startup doesn’t waste time getting funds from external investors.
Facebook and Google are great examples of this type of startup.
How To Know If A Scalable Startup is Suitable For You
Before you think of venturing into a scalable startup, you need to know if it is for you.
Here are some questions that can serve as pointers to know if or not a scalable startup is for you:
Does Your Idea Have a Growth Potential? – Startups. What Is a Start Up. Types of Startups
This type of startups is more interested in rapid growth more than any other startup.
Therefore, when venturing into this startup, you need to be sure that the idea you have has a great potential for rapid growth.
For it to have this potential, it has to be capable of covering an extensive part of the market.
So, before you venture into a scalable startup, ensure that you ask yourself this question.
Check here to discover five signs that you have a great business idea.
Are You Ready and Capable of Challenging The Industry Status Quo?
Startups, especially scalable startups don’t follow the known template for operation.
Rather, they challenge industries’ status quo and make new templates by being innovative.
So, when considering venturing into a scalable startup, you need to ask yourself if you will be an innovator who will readily challenge the industry’s status quo.
Are You Ready To Be An Industry Leader? – Startups. What Is a Start Up. Types of Start Ups
Since scalable startups focused on building game-changing products and services, they often become the best in their industry.
When this happens, the founders automatically become a leader in that industry.
So, when considering venturing into a scalable startup ask yourself if you want to be an industry leader.
3. Large Business Startups
Large business startups are startups that are built because businesses need to keep staying relevant in changing markets.
The market changes every day as new technology is invented and customer interest changes.
Therefore, to adapt to these changes and stay relevant, businesses create large business startups.
These startups are supported financially by successful businesses, so they are more capable of reaching more audiences and diversifying product offerings.
Most importantly, they are capable of keeping businesses relevant in the changing market.
How To Know If a Large Business Startup Is Suitable For You – Startup. What Is a Start Up. Types of Startups
Large business startups are great ventures as they ensure that businesses still keep making waves in changing markets.
However, before you think about starting a large business startup, you need to know if it will be suitable for you.
Here are some questions you can ask yourself to check if owning a large company startup will work well for you:
Do You Already Have a Large and Successful Business? – Startups. What Is a Start Up. Types of Start Ups
To create a large company startup, you need to already have a large and successful business
This is because the main aim of this sort of startups is to help the business they are under to keep tapping into changing markets.
Also, having a large and successful business will help to boost the success of the large business startup you intend to start.
So, if you don’t have a successful business already, then this startup venture is likely not for you.
Are You Seeking To Diversify?
Apart from having a successful business already, you need to be someone who is seeking to diversify things in your business.
If you are not, then this business is not suitable for you.
Therefore, it will be wise to not venture into it.
4. Buyable Startups – Startups. What Is a Start Up. Types of Startups
Startups that are founded to be bought by larger businesses or companies are called buyable startups.
Therefore, they aren’t built by the founders to be a multi-billion company.
Most of these startups are found in the software and technology industry.
How To Know If Buyable Startup Is Suitable For You
You might be thinking of starting a buyable startup.
However, before you venture into it you need to check if it will work well for you.
Here are some questions you can ask yourself to know if a buyable startup will be good for you:
Are You Ready To Build and Grow A Short-termed Productive Business? – Startups. What Is a Start Up. Types of Start Ups
As you now know, buyable startups are built to be sold.
Hence, you have to be ready to build a business that you will willingly let go of.
If you cannot build a short-termed productive business, then maybe a buyable business is not for you.
Does Your Idea Have Great Growth Potential?
Another question you need to ask yourself is “do I have a business idea that has great growth potential?”
This is because for you to sell a buyable startup you need to grow it to its best possible state.
So, if your idea doesn’t have great growth potential, you should reconsider venturing into the business.
5. Social Startups
This type of startups is built not for the founders to gain money but to bring about a positive environmental or social change.
Social entrepreneurs is the term used to refer to entrepreneurs who engage in social startups.
They often don’t expect to get a huge payout from the business.
However, if the startup is not structured as a nonprofit, the founders will make money from it.
How To Know If A Social Startup Is Suitable For You – Startups. What Is a Start Up. Types of Startups
You might like the idea of starting a social startup.
However, before considering venturing into this business, you need to check if it will work well for you.
Here are some questions you could use to check if you will do well owning a social startup:
Are You Interested In Making Positive Social Impact Without An Interest In Profit-Making?
Social startups main focus is not about making money but building something that will bring about a positive impact in the society.
So, you should find out if you are interested in making a positive environmental or social impact.
If you are not, then this sort of business is most likely not for you.
Can Your Business Idea Resolve a Social Problem?
Resolving social or environmental problems should be what your business idea aims for.
So, if you do not have a good idea that will resolve a widespread issue, then you should probably reconsider venturing into a social startup.
6. Small Business Startups – Startups. What Is a Start Up. Types of Startups
People build small business startups to provide substantial and stable funds for themselves while meeting the need of small target market.
In other words, they are built for longevity and not scalability.
Families own and operate most small business startups.
How To Know If a Small Business Startup Is For Suitable You – Startups. What Is a Start Up. Types of Startups
The idea of owning a small business startup sounds great.
However, don’t be too quick to venture into it.
Rather, check if going into the business will be suitable for you by asking yourself the following questions:
Will You Work With Your Family and Local Employees? – Startups. What Is a Start Up. Types of Startups
Something you have to consider when thinking of venturing into a small business startup is if you would employ locals and work with family.
If you are not willing to do this, then owning a small startup business might not be suitable for you.
This is because you cannot build a small business startup to be long-lasting and sustainable alone.
And opting to work with people out of your locality will make building your business more difficult.
Is Your Main Aim To Build A Long-lasting and Sustainable Business? – Startups. What Is a Start Up. Types of Startups
When it comes to small business startups the main aim is to build a sustainable and long-lasting venture.
So, if your main aim is to make a quick profit, then you might need to reconsider going into the business.
Conclusion On Startups. What Is a Start Up. Types of Startups
Startups are businesses that you venture in with a mind ready to make things better and take risks.
They require you to step out of the status quo and do more.
If you have had a read of the information provided in this article, you should now know about startups, including what a startups is and the types of start up.