A startup is a company created to transform a known industry or start one from scratch. Startups come in both local and international forms. Your goal may be to develop a new product, improve the capabilities of an existing service or manufacturing unit, or improve sales or service in a specific area. Besides starting a project, one of the most important tasks of the owner is to attract investment for further scaling and entry into a large market.
What startups are and how they differ from other types of businesses
an online school, कसीनो, a shopping app or a café around the corner are not startups – their business models are clear and tried and tested many times. For a company to be a startup, it must meet several parameters. Among them: a unique business model, a clearly defined start-up and market entry phase and the need to attract external investments.
A startup always relies on new technologies, looks for new sales channels and sometimes offers a radically new positioning for the market.
A startup is associated with a certain entrepreneurial mindset. Such projects are often built according to the scheme: “Invent, construct, develop prototypes, turn and resell”. Sometimes the owners stay with the startup, but in most cases they still scale the project with funds raised and not their own.
Let’s list the signs of a startup:
- The uniqueness and novelty of the project idea and/or the way it was implemented.
- The need to attract external investment.
- Short, fixed deadlines for starting the project.
There are several myths about the startup team. For example, it is believed that it is always small and young. In reality, it can be big and experienced. These can not only be internal specialists, but also external consultants who work part-time.
Startup teams have mandatory functions: They deal with sales, product development, investor and press communication. Attracting investment is an important process for a startup. When a startup has gone from idea to MVP, it goes to the pitch. This is a brief presentation of the business idea to potential investors.
How startups attract investment
When a startup is fully developed and ready for funding, it starts looking for investments. This is how the process looks step by step:
- Creation of a portrait of a potential investor who will be interested in the project. This is necessary in order to adapt the presentation of the project to him in the future.
- Researching different ways to attract investment: bank financing conditions, grants and participation in accelerator programs and startup competitions.
- Preparation of a presentation and an offer for an investor.
- Find ways to contact potential investors.
- Reviewing open information about investors and holding meetings with them.
- The process of raising investments is usually divided into rounds.
Pre-Seed: Founders invest their own money, request money from parents and friends. This phase is called FFF: Family, Friends, Fools. Fools refers to investors with no experience.
Seed: seed investments. This money is used to refine the main product, look for product-market fit and make the first sales.
Round A: In this phase, the company already has a finished product and can attract the interest of investors. The money is spent on scaling sales.
Round B: The company can not only raise funds for sales, but also for geographical expansion, for example. Rounds can be repeated in the future.