Definition and purpose of startups

Summary

A startup (or start-up) is a new company or project typically created by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship includes all new businesses, including self-employment and ventures that may not aim to go public, startups are distinguished by their intention to grow large beyond the solo founder. In early stages, startups operate under significant uncertainty and often experience high failure rates, though a minority achieve major success and influence (for example, becoming “unicorns,” privately held companies valued at over US$1 billion).

Key Points

• 1

  Startups aim to validate a scalable business model rather than merely start a new business.

• 2

  They typically face high uncertainty early on and have high failure rates, with only a minority achieving exceptional success.

• 3

  Founders usually begin by identifying a problem and then validating demand through methods such as interviews and building a minimum viable product (MVP).

• 4

  Startups are commonly characterized by innovation, potential for rapid growth, vulnerability, and often the need for external funding.