You have probably heard about startups, but perhaps you are not entirely sure what they are, or how they are different from your run of the mill new business. While startups are certainly businesses, as startup experts like John Bradberry will tell you there are some features of startups that make them quite distinct from a typical business.
Scalability is a must-have
The key to a start-up business is that the product or service they offer must be “scalable.” Scalable products and services are those that can be produced at every increasing rates without a parallel increase in the cost. For example, if you want to sell more and more computers, you will need to physically produce more computers, which will require you to spend more money on the production process. However, if you want to sell more and more computer software, you can do so simply by creating more copies. The software is scalable, whereas the computer is not.
Startup products or services solve common problems
Traditional businesses often have a product or service that addresses a specific need that may be felt by a relatively small market. Startups focus on finding solutions to common problems or challenges and for that reason have a very broad appeal. For example, a problem that many people experienced in the past was how to get from one part of the city to another in a way that was both affordable and secure. Ride-sharing apps have offered a way to easily match these people with other people who could give them a ride. Startups work by identifying common problems like these and finding solutions to bring to the market. A common impression of the products that startups bring is that they seem so obvious that it is hard to imagine they didn’t exist before they existed.
Startups need investors who are ok with risk
Because startups have to spend considerable resources on the development of the product, they need investors who are ok with a fairly high degree of risk. What startups offer to their investors at first is the promise that a marketable and affordable solution to a problem will be found. They do not offer that as a guarantee, however. These investors must be willing to put their money into the possibility that the startup will come up with the right solution to the right problem. Otherwise, it is money down the drain.
Startups expect rapid growth
Because startups focus on scalable products or services, there is very little that prevents them from growing very rapidly. To return to the software example, it would be very difficult to rapidly product more and more computers, but it would be relatively easy and fast to copy more software. It is also the case that scalable products and services tend to be technology-based and for that reason, they are easily sold online. The business itself can be mostly or entirely conducted online. This allows them to focus on a global market which means that they are able to grow both in scale and scope. This can be compared to a traditional business which is typically selling products or services to specialized local markets.
These are just a few of the ways that a startup differs from a traditional business.