From Idea to Market: A Comprehensive Startup Course

ovqjlNovember 2, 2023

Starting a business doesn’t necessarily mean starting a startup. If the term has fallen into the common language and is often used to designate a young company, the startup differs from the classic company by a number of elements.

In this course, you will discover what a startup really is and what the characteristics of this type of company are. We will focus in particular on the temporary nature of the development phase of a startup.

I. Definition of a startup

The term startup appeared in the 1920s on Wall Street during Radiomania, a key period in American stock market history characterized by a massive investment in companies specializing in wireless transmission.

But it was not until the 1990s that the term was popularized by the proliferation of dot com companies (internet companies) and venture capital companies in the United States.

Literally, “startup” means “entreprise qui lance” or “jeune pousse” in French. The notion of startup is therefore linked to the notion of experimentation on a new activity, on a new market, with a risk that is difficult to assess.

The most common definition is that of Steve Blank, a famous Silicon Valley entrepreneur known for developing the Lean Startup method:

This definition makes it possible to pinpoint the most fundamental point of differentiation between a startup and a company.

  • A company is organized to execute and optimize an already established business model, marketing a product or service in a perfectly identified market.
  • A startup experiments with a business model and tests an uncertain market. This does not allow it to clearly define all its components and, consequently, ensure immediate profitability.

Dave McClure, founder of 500 Startups, offers a slightly different definition, emphasizing the experimental nature of any startup:

« Une startup est une entreprise qui ne sait pas (1) ce qu’est son produit, (2) qui sont ses clients et (3) comment gagner de l’argent »

For him, a startup is a company that does not know exactly:

  1. what its product is
  2. who are its customers
  3. how to make money

The startup is therefore also distinguished by the risk associated with experimentation: the first years of a startup’s life are made of numerous iterations and tests, and it is not uncommon for many projects to fail.

As you can see, there are several theoretical definitions of the startup, depending on which element you want to focus on. In practice, however, there are characteristics common to all startups.

II. The characteristics of a startup

Whatever its sector of activity, its number of years of activity and its size, a startup always meets the following three characteristics.

The transitional/temporary aspect: a startup is not intended to last indefinitely. Rather, it is a particular phase of development, the main objective of which is to come out of it.

  • By definition, the startup lasts the time of the phase of exploration and experimentation. It therefore covers the period during which we look for the business model and refine the various parameters.
  • The prospect of strong and rapid growth, even exponential. This is the main feature highlighted by Paul Graham, co-founder of the famous YCombinator incubator

« A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth. »

What could be translated as: “A startup is a company designed to grow quickly. Being newly created does not make a company a startup. Nor is it necessary for a startup to be in the field of technology, or to be funded by VC funds, or to have some sort of “exit”. The only thing that matters is growth. Everything else we associate with startups comes from growth. “

Scalability, that is, its ability to maintain high profitability despite exponential growth. A scalable business is a structure in which the revenues generated are not directly related to the increase in costs. The scalability of a startup depends on its ability to attract many users and make people talk about it. It is therefore essential to target a global market from the beginning and to set up a structure that can grow exponentially.

III. The life cycle of a startup

The lifetime of a startup is by definition limited. As Peter Thiel, famous Silicon Valley entrepreneur, says in his best-seller: the goal of a startup is to go from 0 to 1, to transform an idea into a sustainable business with a profitable business model, finding a new way to serve and create value.

We can schematically identify four phases in the life of a startup:

  1. the ideation phase, which consists of identifying an idea and testing it with potential users, and then formulating the foundations of a model that works.
  2. the early stage phase, in which the startup accelerates its commercial and technological development and begins to generate revenue, with the objective of finding its business model.
  3. the growth phase, reached when the business model seems to have been found. The startup then faces the challenge of scalability. During this phase, it wonders about the relevance and the solidity of its model if it multiplies its customers and its revenues (by 100, by 1000…).
  4. the maturity phase, which marks the transformation of the startup into a traditional company with an established economic model that is viable over the long term. It can then go public (the famous IPO) or be bought by another company or an investment fund.

For example, Google and Facebook are no longer considered startups because they are companies that have managed to define and stabilize their business model. On the other hand, companies like Uber or Twitter – whose business model is still evolving – remain startups, especially because they need external funding to survive.

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