A startup or startup is a new business or project undertaken by an individual entrepreneur to try, test, develop and market a viable business model. As the name suggests, start up companies seek to establish a market for their product or service before they launch it to the market; to start up businesses often have limited financial resources and/or few employees, and/or are not seeking to develop and maintain relationships with existing customers and vendors. In most cases, start up companies focus on one niche market or product category, such as communications, energy, health, or technology.
One of the most important steps in establishing any start up company is choosing the right business plan or strategy. This typically includes determining which markets or product categories will best serve the start up company, developing a unique marketing or promotional campaign, evaluating potential customer and technical resources, and identifying and establishing appropriate working capital management policies and procedures. Other factors to consider are evaluating venture funding, determining whether start up companies should seek capital from a bank or other third party, and whether any start up loans or grants may be required. Also, start up companies may be required to provide an executive or chief executive officer who will be in charge of day to day business operations and reporting. The company founders may also choose to recruit key members from within the company to serve as management consultants.
The term ‘start up’ is typically used to describe any new company that is organized for the purpose of starting operations without having a proven track record or operating capital. It can also refer to any company that is planning to generate revenue within a limited time period, such as a start up private company. Many businesses that are in this stage of development seek to raise funds from a limited partner and/or an angel investor for the purpose of building a business. Some venture capital firms prefer to finance start up companies through a purchase and sale agreement, which allow them to acquire control of a business and give restricted shares of stock to the partners.
One of the most important decisions a start up company needs to make is what type of business model or organization it should use to get itself off the ground. While there are many different models, most start up businesses eventually go with a business model that involves some combination of the three elements – an idea for a product or service, a company to produce it, and a market for the product or service. If your start up company is able to successfully manage and develop each element of this three-step process, it will be much easier to raise capital.
As soon as the company has determined its product or service, it can begin to raise capital from a variety of sources. Angel investors and venture capitalists are generally not interested in funding start up companies unless they see a clear future return on their investment. Start up business also need to show potential investors that their business plan will generate a high enough return to allow them to justify investing in the start up company. Some startup companies rely on small amounts of angel funding; however, it is also possible to obtain start up loan from a number of financial institutions. Regardless of the type of capital source used to fund the start up company, it is critical that start up company officials understand and respect the requirements and guidelines of each source.
Raising capital can be an arduous task for new start up businesses. However, it is important that these businesses recognize that the task of raising capital is not something that should be taken lightly. Start ups should approach the process with cautious optimism and an overall sense of eagerness to overcome their financial hurdles.