A start-up is a special breed of company that gets a lot of attention (especially in the tech world). If you go by the definition of start-up you may find the following as
Definition-1: “A start-up is a company that’s in the initial stages of business. Until the business gets off the ground, a start-up is often financed by its founders and may attempt to attract outside investment. The many funding sources for start-ups include family and friends, venture capitalists, crowdfunding, and loans.” (Investopedia)
Definition-2: “Start-ups are young companies founded to develop a unique product or service, bring it to market and make it irresistible and irreplaceable for customers.
Start-ups are rooted in innovation, addressing the deficiencies of existing products or creating entirely new categories of goods and services, thereby disrupting entrenched ways of thinking and doing business for entire industries. That’s why many start-ups are known within their respective industries as “disruptors.”(Forbes)
Definition-3: A start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend to become registered, start-ups refer to new businesses that intend to grow large beyond the solo founder.
In the beginning, start-ups face high uncertainty and have high rates of failure, but a minority of them do go on to be successful and influential. Some start-ups become unicorns; that is privately held start-up companies valued at over US$1 billion. (Wikipedia)
The below valuable excerpt is from New York Times Bestseller ‘Rework’ by Jason Fried & David Heinemeier Hansson.
It’s OK, We’re a Start-up!
A start-up is a magical place. It’s a place where expenses are someone else’s problem. It’s a place where that bothersome thing called revenue is never an issue, you can spend other people’s money until you figure out a way to make your own. And it’s a place where the laws of business physics don’t apply.
The problem with this magical place is it’s a fairy tale. The truth is every business, new or old, is governed by the same set of market forces and economic rules. Revenue in, expenses out. Turn a profit or wind up gone. Start-ups try to ignore this reality. They are run by people trying to postpone the inevitable, i.e., that moment when their business has to grow up, turn a profit, and be a real, sustainable business.
Anyone who takes a “we’ll figure out how to profit in the future” attitude to business is being ridiculous. That’s like building a rocket ship but starting off by saying, “Let’s pretend gravity doesn’t exist.” A business without a path to profit isn’t a business, it’s a hobby.
So don’t use the idea of a start-up as a crutch. Instead, start an actual business. Actual businesses have to deal with actual things like bills and payroll. Actual businesses worry about profit from day one. And actual businesses don’t mask deep problems by saying, “It’s OK, we’re a start-up.” Act like an actual business and you’ll have a much better shot at succeeding.
What’s Your Exit Strategy?
Another thing you hear a lot: “What’s your exit strategy?” You hear it even when you’re just beginning. What is it with people who can’t even start building something without knowing how they’re going to leave it? What’s the hurry? Your priorities are out of whack if you’re thinking about getting out before you even dive in. Would you go into a relationship planning the breakup? Would you write the prenup on a first date? And would you meet with a divorce lawyer the morning of your wedding? That would be ridiculous, right?
You need a commitment strategy, not an exit strategy. You should be thinking about how to make your project grow and succeed, not how you’re going to jump ship. If your whole strategy is based on leaving, chances are you won’t get far in the first place. You see so many aspiring businesspeople pinning their hopes on selling out. But the odds of getting acquired are so tiny. There’s only a slim chance that some big suitor will come along and make it all worthwhile.
Maybe 1 in 1,000? Or 1 in 10,000? Plus, when you build a company with the intention of being acquired, you emphasize the wrong things. Instead of focusing on getting customers to love you, you worry about who’s going to buy you. That’s the wrong thing to obsess over.
What’s After Your Exit?
And let’s say you ignore this advice and do pull off a flip. You build your business, sell it, and get a nice payday. Then what? Move to an island and sip your favorite drink all day? Will that really satisfy you? Will money alone truly make you happy? Are you sure you’ll like that more than running a business you actually enjoy and believe in?
That’s why you often hear about business owners who sell out, retire for six months, and then get back in the game. They miss the thing they gave away. And usually, they’re back with a business that isn’t nearly as good as their first. Don’t be that guy. If you do manage to get a good thing going, keep it going. Good things don’t come around that often. Don’t let your business be the one that got away.
Embrace the Idea of Less Mass
Embrace the idea of having less mass. Right now, you’re the smallest, the leanest, and the fastest you’ll ever be. From here on out, you’ll start accumulating mass. And the more massive an object, the more energy is required to change its direction. It’s as true in the business world as it is in the physical world. Mass is increased by …
- Long-term contracts
- Excess staff
- Permanent decisions
- Thick process
- Inventory (physical or mental)
- Hardware, software, and technology lock-ins
- Long-term road maps
- Office politics
Avoid these things whenever you can. That way, you’ll be able to change direction easily. The more expensive it is to make a change, the less likely you are to make it.
Huge organizations can take years to pivot. They talk instead of act. They meet instead of do. But if you keep your mass low, you can quickly change anything: your entire business model, product, feature set, and/or marketing message. You can make mistakes and fix them quickly. You can change your priorities, product mix, or focus. And most important, you can change your mind.
“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.” – Steve Jobs