In a pitch description, a start-up is a company whose operations are in an early stage. Usually, the term refers to an enterprise that is in the process of determining product-market fit, experimenting with customer segmentation, and working towards a positive contribution margin.

A start-up company is a small business?

For a long time, investors depicted start-ups as big companies’ smaller versions. This brought organisational and ideological issues, as there is a big difference in terms of funding strategy for a star-up, a small business and a big company.

A start-up is a temporary organisation whose main goal is to search for a replicable and scalable business model. Hence, a start-up founder performs three key roles:

• devises the service or product and its specific features,
• creates a series of hypotheses about all the pieces of the business model (e.g., who are the customers? What are the distributions channels? How to build and finance the company?),
• validates whether the chosen model is correct or not, namely by assessing if the customers behaviour is in accordance with the business model forecasting (which rarely occurs).

Once the business model has proven viable, it is time to move forward. The start-up must shift towards outcomes production and processes implementation. A change that often results in the abandonment of the agility and innovation that featured the business early days.

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What should everybody know before setting up a start-up?

A start-up is not a type of business, it is a phase. It corresponds to the moment when start-up founders’ goal is to find and validate a business model suitable to scale-up and replication, resorting to up-to-date technology. Start-ups are created to growth, which explains why most start-ups are tech start-ups, and aim to reach more people through technology.

Start-ups are not just for youngsters. According to several studies, the average age of start-ups founding members teams varies from 35 to 44 years old. In addition, 70% of start-up founders were married when they started their first start-up venture and 60% had at least one child.

Failure is part of the process. As in other areas of life, some ideas might never materialise (e.g., due to a lack of market demand). But an entrepreneur should not give up, in case he/she believes that things can be done in another way or in different circumstances. Entrepreneurs take risks and they engage in trialling processes to get real answers and to overcome problems and obstacles.

Working hard does not warrant success but working smart does. Nine out of ten start-ups fail. The odds do not favour entrepreneurs, as some will make it but many more will not. Successful entrepreneurs are, therefore, unique. But probably they have tried different approaches and failed before achieving success.

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A start-up solves a problem via a solution (product and/or service) that customers will pay for (or use). Thus, the founder should keep a very close relationship with potential clients, which should be his/her mentors, advisors, and investors. An entrepreneur must take seriously the execution of his/her ideas. Therefore, delays are not justifiable, as meeting with clients is a crucial step for qualitative validation in the start-up process.

Overcome the fear to fail. When revenue grows steadily, if not exponentially, when investors are interested, and talents are willing to work for free, fear cannot interfere. It is key to avoid delays and take the necessary steps to keep moving forward, with commitment and resilience.

Know the numbers. A degree in statistics or finance is not necessary if the key metrics are clear and can be easily learned. Concepts as income, revenue, growth rate, break-even point, margin, and others, must be familiar to every start-upper. Big decisions might become the best decisions if they are informed by numbers.

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Start-ups are not always about innovation. We often associate start-ups with innovation, but this idea can be misleading. Not every growing and profitable start-up is innovative. There are other strategies to solve problems and address unmet needs: replicating, repurposing or upgrading existing solutions. Replication is when an existing model is taken to a new condition. Repurposing is about the use of an existing model that it is adopted to find new solutions. And upgrading is when an existing model performance and quality is improved and brought into a competitive level.

Anyone can start part-time but can only grow full-time. Start-up initiation is more an attitude than an effort. It depends upon the drive to find answers and to prove that a business idea is viable. Having 100-200 potential users that contribute to test one product and provide their feedback and input to validate it is ideal to build a solid business structure. Even if this is done in part-time, it is a way to understand the future possibilities and investment needs, as well as it is a chance for entrepreneurs to fully commit and upgrade the product.

Things never go as planned. Openness to change is a must for start-uppers. Most start-ups end up doing something quite different than what they originally intended. This is normal, and it is not related with industry knowledge or experience. To stick to the original idea or plan might lead to setbacks, as it might be much more fruitful to explore different and better ideas. Being open to change is critical for a start-up founder, at any point of the process no matter how much was achieved.

There is no need to be a start-up genius to set up a successful business. Learning about start-ups and best practices does not require months or years of study, attending to endless conferences and courses, or looking for expert advice, etc. It might be better to identify 3-5 trustworthy sources (e.g., books, blogs, lectures), to get information and knowledge as the start-up progress is underway.

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If you really want to create a start-up, do it. Most often than not, determination is an antidote for failure. Being successful in business takes time, effort, and a strong drive to overcome setbacks. Creating a start-up just for the fun, will rarely have a happy ending. When a start-up is established for learning and/or as a side project, things might be different. But the most successful start-ups are built upon a personal need. Therefore, those who feel a sense of urgency to solve a problem are more likely to set up successful start-ups.

Different types of start-ups

Businesses are built upon different strategies, have distinct aims, and are classified accordingly. The world of start-ups is similar, and there are six main types of start-ups:

• lifestyle start-ups: work to live a passion,
• small business start-ups: work to feed the family,
• scalable start-ups: born to be big,
• buyable start-ups: that are to be sold after generating value,
• large company start-ups: innovate or evaporate (companies with a revolutionary product that aim to be global),
• social start-ups: whose drive is to make a difference.

Regardless of this variation, as previously mentioned, all start-ups are temporary: start-ups must innovate and create new solutions (products and/or services) continuously, in order to achieve growth. Otherwise, they will turn into small business, or in the worst-case scenario, they will be ended due to lack of market and costumers.

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The difference between a start-up and a digital start-up

Now you that you have a big picture of what start-ups are it is time to ask: what is a digital start-up?

A start-up is called digital when its main assets are linked to technological investment. And when its value proposition is based upon, at least, one of the following items:

• automated business processes using hardware and software, as the Amadeus traveling platform,

• the exploitation of data to produce services, like Facebook,

• the delivery of online services, whether or not associated with commercial goods or other services, as Uber does,
  
• the permission of financial transactions through secure platforms, like PayPal,.
  

Digital start-ups have proved vital to boost technological change. They provide innovative services and are keen to further develop and/or experiment new products and services. Consequently, digital start-ups require several rounds of funding to develop their projects and foster their growth, by increasing their relevance and market shares. And when a start-up company grows it ceases to be a start-up, it becomes a scalable start-up.