Common Misconceptions We All Make About Startups
You must have noticed the universal utilization of the word “startup” in your everyday life. Suddenly, every little project or idea has become a startup. The casual association of this term with anything new and out-of-the-box highlights the question: What actually is a startup?
Even though nowadays people are calling every neighborhood convenience store or food stall a startup, the truth is that there are a few characteristics that define a startup and differ from other types of businesses. This is not textbook material, though. My years of experience as an entrepreneur and investor have taught me a few good rules about how startups work.
“Growth Orientation” Is the Core Attribute of Startups
A startup is a newly founded business with some innovative strategy and a purpose to disrupt how things are being done today, subsequently acquiring explosive profits in a relatively short period. We all know that. However, Paul Graham, co-founder of Y-Combinator, ingeniously highlighted that a startup’s key feature is it being “a company designed to grow fast.”
This basically means that being new and innovative does not necessarily make your business a startup. These should also be growth-oriented, with a clear plan for achieving that goal.
To that distinction, I would like to add that Information Technology (IT) is a central element of most startups, as evident by this sector’s high growth statistics in recent years. The most talked-about startups are those related to cybersecurity, artificial intelligence (AI), alongside various industries explicitly associated with IT. Though some startups focus on non-tech sectors like real-estate, entertainment, and agriculture, they also involve some degree of technological factors for bettering processes, sharing knowledge, improving forecasts, etc.
An Idea in Itself Is Not Useful Without the Necessary Action
Let’s not beat around the bush here: Just having a vision or innovative idea is far from being enough to make it a successful endeavor. You need a whole lot of determination, motivation, and stubbornness to get the wheels rolling for your new business, alongside funding and a pinch of luck. However, the vision is certainly the core.
Speaking of vision, it is important to make another point clear. The prevalent belief that a business with a 100% unique vision has higher chances of making it big is, in its essence, wrong. An idea does not have to be strictly original for a startup to succeed, as you can also utilize an improved version of a previously popular innovation. For example, numerous blue-chip companies of today were started by modifying previous ideas.
All in all, it depends on your skills and competency to weigh the worth of an already-present concept and calculate whether it has room for improvement.
Profits Cannot Be Achieved Instantly — Traction Takes Time
There is no denying that financing is one of the significant tailwinds of startups, as every company needs cash flow to maintain itself over time. Naturally, a startup is not built on immediate returns but rather on investments and loans — and these need to be paid back.
The validation phase marks the developing period of a startup, where founders or investors support it. Entrepreneurs, therefore, should not count on early gains and should carefully plan their finances — especially when and how they plan to reimburse.
I hope I’ve helped you make the important distinction between a startup and other types of businesses. If your dream is forming one of your own, it is definitely important for you to know that, first and foremost, you are on the right path.
Having said that, setting up your startup might seem very scary. I admit that it was frightening for me when I just started. That’s why I would recommend passionate minds to take on the challenge and overcome these misconceptions, but not without careful research, planning, and resources. That being said, learning the true meaning behind startups and adopting a balanced & competent approach is certainly your first step towards becoming a successful entrepreneur.