A startup is a company that's in the initial stages of business. Founders normally finance their start-ups and may attempt to attract outside investment before they get off the ground. Funding sources include family and friends, venture capitalists, crowdfunding, and loans.
Types of Startups?
Small business start-ups
Small business start-ups have small teams, they are generally content with their size as they sell their products and services. While they are interested in growth, they grow at their own pace, which is gradual in most cases. Such start-ups are often bootstrapped or self-funded, meaning that there’s less pressure to scale up or be beholden to the immediate needs of investors.
Buyable Startups
The concept here is to build a business with a small team at low cost and then selling it to a larger entity. These startups are very common in Technology and Software industries.
Scalable Startups
These are based on the ‘Snowball Effect’. Once a business has a marketable idea they develop a small customer base, if it becomes popular the founders raise capital from outside investors (for e.g., angel investors, venture capitalists, business partners, friends, family, etc). With the addition of new capital, they can support growth initiatives to score more customers and eventually grab the attention of larger enterprises willing to buy them out.
Offshoot Startups
These are businesses that have branched off from larger corporations to become distinct entities. For example, an offshoot company might be established by bigger company to enter a new market or disrupt smaller competitors. These startups act independently of their parent companies and have the freedom to do business and experiment without drawing as much attention or scrutiny.
Social Startups
Some startups are specifically designed to do good in society. Social startups, which include charities and non-profit organizations, scale up for the sake of philanthropy. They operate similarly to any other startup but do so with the help of grants and donations
Challenges
Raising a startup from the ground up is not a simple task. It involves a plethora of problems that need to be addressed from the get-go. Just to begin with, one needs business licenses, file for incorporation, financial planning, devising policies and procedures and finally implementing systems and tracking expenses.
Once the startup is on its feet it needs continual management of bookkeeping, payroll, tax preparation, compliance with various government bodies, preparation for taxes, and financial statements.
Additionally, when growth periods come, one needs reports on pricing, cash flow, budgeting, and forecasts, along with audit support and preparation.
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