Startup company

A startup company (startup or start-up) is an entrepreneurial venture which is typically a newly

emerged, fast-growing business that aims to meet a marketplace need by developing or offering
an innovative product, process or service. A startup is usually a company such as a small
business, a partnership or an organization designed to rapidly develop a scalable business model.

Evolution

Startup companies can come in all forms and sizes. Some of the critical tasks are to build
a co-founder team to secure key skills, know-how, financial resources and other elements to
conduct research on the target market. Typically, a startup will begin by building a first minimum
viable product (MVP), a prototype, to validate, assess and develop the new ideas or business
concepts. In addition, startups founders do research to deepen their understanding of the ideas,
technologies or business concepts and their commercial potential. A Shareholders' agreement
(SHA) is often agreed early on to confirm the commitment, ownership and contributions of the
founders and investors and to deal with the intellectual properties and assets that may be
generated by the startup. Business models for startups are generally found via a "bottom-up" or
"top-down" approach. A company may cease to be a startup as it passes various milestones, such
as becoming publicly traded on the stock market in an Initial Public Offering (IPO), or ceasing to
exist as an independent entity via a merger or acquisition. Companies may also fail and cease to
operate altogether, an outcome that is very likely for startups, given that they are developing
disruptive innovations which may not function as expected and for which there may not be
market demand, even when the product or service is finally developed. Given that startups
operate in high-risk sectors, it can also be hard to attract investors to support the product/service
development or attract buyers.

The size and maturity of the startup ecosystem where the startup is launched and where it
grows have an effect on the volume and success of the startups. The startup ecosystem consists
of the individuals (entrepreneurs, venture capitalists, Angel investors, mentors); institutions and
organizations (top research universities and institutes, business schools and entrepreneurship
programs operated by universities and colleges, non-profit entrepreneurship support
organizations, government entrepreneurship programs and services, Chambers of commerce)
business incubators and business accelerators and top-performing entrepreneurial firms and
startups. A region with all of these elements is considered to be a "strong" entrepreneurship
ecosystem. Some of the most famous entrepreneurial ecosystems are Silicon Valley in California,
where major computer and Internet firms and top universities such as Stanford University create
a stimulating startup environment, Boston (where Massachusetts Institute of Technology is
located) and Berlin, home of WISTA (a top research area), numerous creative industries, leading
entrepreneurs and startup firms.
Investors are generally most attracted to those new companies distinguished by their
strong co-founding team, a balanced "risk/reward" profile (in which high risk due to the untested,
disruptive innovations is balanced out by high potential returns) and "scalability" (the likelihood
that a start-up can expand its operations by serving more markets or more customers). Attractive
startups generally have lower "bootstrapping" (self-funding of startups by the founders) costs,
higher risk, and higher potential return on investment. Successful startups are typically more
scalable than an established business, in the sense that the startup has the potential to grow
rapidly with a limited investment of capital, labor or land. Timing has often been the single most
important factor for biggest startup successes, while at the same time it's identified to be one of
the hardest things to master by many serial entrepreneurs and investors.
Startups have several options for funding. Venture capital firms and angel investors may
help startup companies begin operations, exchanging seed money for an equity stake in the firm.
Venture capitalists and angel investors provide financing to a range of startups (a portfolio), with
the expectation that a very small number of the startups will become viable and make money. In
practice, though, many startups are initially funded by the founders themselves using
"bootstrapping", in which loans or monetary gifts from friends and family are combined with
savings and credit card debt to finance the venture. Factoring is another option, though it is not
unique to startups. Other funding opportunities include various forms of crowdfunding, for
example equity crowdfunding, in which the startup seeks funding from a large number of
individuals, typically by pitching their idea on the Internet.

Business partnering

Startups usually need to form partnerships with other firms to enable their business model
to operate. To become attractive to other businesses, startups need to align their internal features,
such as management style and products with the market situation. In their 2013 study, Kask and
Linton develop two ideal profiles, or also known as configurations or archetypes, for startups that
are commercializing inventions. The inheritor profile calls for management style that is not too
entrepreneurial (more conservative) and the startup should have an incremental invention
(building on a previous standard). This profile is set out to be more successful (in finding a
business partner) in a market that has a dominant design (a clear standard is applied in this
market). In contrast to this profile is the originator which has a management style that is highly
entrepreneurial and in which a radical invention or a disruptive innovation (totally new standard)
is being developed. This profile is set out to be more successful (in finding a business partner) in
a market that does not have a dominant design (established standard). New startups should align
themselves to one of the profiles when commercializing an invention to be able to find and be
attractive to a business partner. By finding a business partner a startup will have greater chances
to become successful.
Culture

Startup founders often have a more casual or offbeat attitude in their dress, office space
and marketing, as compared to traditional corporations. Startup founders in the 2010s may wear
hoodies, sneakers and other casual clothes to business meetings. Some startups have recreational
facilities in their offices, such as pool tables, ping pong tables and pinball machines, which are
used to create an attractive, fun work environment, stimulate team development and team spirit,
and encourage creativity. Some of the casual approaches, such as the use of "flat" organizational
structures, in which regular employees can talk with the founders and chief executive officers
informally, are done to promote efficiency in the workplace, which is needed to get their business
off the ground. In a 1960 study, Douglas McGregor stressed that punishments and rewards for
uniformity in the workplace are not necessary, because some people are born with the motivation
to work without incentives. Some startups do not use a strict command and control hierarchical
structure, with executives, managers, supervisors and employees. Some startups offer employees
stock options, to increase their "buy in" into the start up (as these employees stand to gain if the
company does well). This removal of stressors allows the workers and researchers in the startup
to focus less on the work environment around them, and more on achieving the task at hand,
giving them the potential to achieve something great for their company.
This culture today has evolved to include larger companies aiming at acquiring the bright
minds driving startups. Google, amongst other companies, has made strides to make purchased
startups and their workers feel at home in their offices, even letting them bring their dogs to
work. The main goal behind all changes to the culture of the startup workplace, or a company
hiring workers from a startup to do similar work, is to make the people feel as comfortable as
possible so they can have the best performance in the office. Some companies even try to hide
how large they are to capture a particular demographic, as is the case with Heineken recently.

Co-founders

Co-founders are people involved in the initial launch of startup companies. Anyone can
be a co-founder, and an existing company can also be a co-founder, but frequently co-founders
are entrepreneurs, engineers, hackers, venture capitalists, web developers, web designers and
others involved in the ground level of a new, often high-tech, venture. The language of securities
regulation in the United States considers co-founders to be "promoters" under Regulation D. The
U.S. Securities and Exchange Commission definition of "Promoter" includes: (i) Any person
who, acting alone or in conjunction with one or more other persons, directly or indirectly takes
initiative in founding and organizing the business or enterprise of an issuer; However, not every
promoter is a co-founder. In fact, there is no formal, legal definition of what makes somebody a
co-founder. The right to call oneself a co-founder can be established through an agreement with
one's fellow co-founders or with permission of the board of directors, investors, or shareholders
of a startup company. When there is no definitive agreement (like SHA), disputes about who the
co-founders are can arise.

Startup investing

Startup investing is the action of making an investment in an early-stage company (the

startup company). Beyond founders' own contributions, some startups raise additional
investment at some or several stages of their growth. Not all startups trying to raise investments
are successful in their fundraising. The solicitation of funds became easier for startups as result
of the JOBS Act. Prior to the advent of equity crowdfunding, a form of online investing that has
been legalized in several nations, startups did not advertise themselves to the general public as
investment opportunities until and unless they first obtained approval from regulators for an
initial public offering (IPO) that typically involved a listing of the startup's securities on a stock
exchange. Today, there are many alternative forms of IPO commonly employed by startups and
startup promoters that do not include an exchange listing, so they may avoid certain regulatory
compliance obligations, including mandatory periodic disclosures of financial information and
factual discussion of business conditions by management that investors and potential investors
routinely receive from registered public companies.

Evolution of investing
After the Great Depression, which was blamed in part on a rise in speculative
investments in unregulated small companies, startup investing was primarily a word of mouth
activity reserved for the friends and family of a startup's co-founders, business angels and
Venture Capital funds. In the United States this has been the case ever since the implementation
of the Securities Act of 1933. Many nations implemented similar legislation to prohibit general
solicitation and general advertising of unregistered securities, including shares offered by startup
companies. In 2005, a new Accelerator investment model was introduced by Y Combinator that
combined fixed terms investment model with fixed period intense boot camp style training
program, to streamline the seed/early stage investment process with training to be more
systematic.
Following Y Combinator, many accelerators with similar models have emerged around
the world. The accelerator model has since become very common and widely spread and they are
key organizations of any Startup ecosystem. Title II of the Jumpstart Our Business Startups Act
(JOBS Act), first implemented on September 23, 2013, granted startups in and startup co-
founders or promoters in US. the right to generally solicit and advertise publicly using any
method of communication on the condition that only accredited investors are allowed to
purchase the securities. However the regulations affecting equity crowdfunding in different
countries vary a lot with different levels and models of freedom and restrictions. In many
countries there are no limitations restricting general public from investing to startups, while there
can still be other types of restrictions in place, like limiting the amount that companies can seek
from investors. Due to positive development and growth of crowdfunding, many countries are
actively updating their regulation in regards to crowdfunding.

Investing rounds
When investing in a startup, there are different types of stages in which the investor can
participate. The first round is called seed round. The seed round generally is when the startup is
still in the very early phase of execution when their product is still in the prototype phase. At this
level angel investors will be the ones participating. The next round is called Series A. At this
point the company already has traction and may be making revenue. In Series A rounds venture
capital firms will be participating alongside angels or super angel investors. The next rounds are
Series B, C, and D. These three rounds are the ones leading towards the IPO. Venture capital
firms and private equity firms will be participating.

Investing online
The first known investment-based crowdfunding platform for startups was launched in
Feb. 2010 by Grow VC, followed by the first US. based company ProFounder launching model
for startups to raise investments directly on the site, but ProFounder later decided to shut down
its business due regulatory reasons preventing them from continuing, having launched their
model for US. markets prior to JOBS Act. With the positive progress of the JOBS Act for crowd
investing in US., equity crowdfunding platforms like SeedInvest and CircleUp started to emerge
in 2011 and platforms such as investiere, Companisto and Seedrs in Europe and OurCrowd in
Israel. The idea of these platforms is to streamline the process and resolve the two main points
that were taking place in the market. The first problem was for startups to be able to access
capital and to decrease the amount of time that it takes to close a round of financing. The second
problem was intended to increase the amount of deal flow for the investor and to also centralize
the process.

Internal startups

Large or well-established companies often try to promote innovation by setting up

"internal startups", new business divisions that operate at arm's length from the rest of the
company. Examples include Bell Labs, a research unit within Bell Corporation and Target
Corporation (which began as an internal startup of the Dayton's department store chain) and three
degrees, a product developed by an internal startup of Microsoft.
Re-starters

Failed entrepreneurs, or restarters, who after some time restart in the same sector with
more or less the same activities, have an increased chance of becoming a better entrepreneur.
However, some studies indicate that restarters are more heavily discouraged in Europe than in
the US.

Trends and obstacles

If a company's value is based on its technology, it is often equally important for the
business owners to obtain intellectual property protection for their idea. The newsmagazine The
Economist estimated that up to 75% of the value of US public companies is now based on their
intellectual property (up from 40% in 1980). Often, 100% of a small startup company's value is
based on its intellectual property. As such, it is important for technology-oriented startup
companies to develop a sound strategy for protecting their intellectual capital as early as
possible. Startup companies, particularly those associated with new technology, sometimes
produce huge returns to their creators and investorsa recent example of such is Google, whose
creators became billionaires through their stock ownership and options. However, the failure rate
of startup companies is very high. One common reason for failure is that startup companies can
run out of funding, without securing their next round of investment or before becoming
profitable enough to pay their staff. When this happens, it can leave employees without
paychecks. Sometimes these companies are purchased by other companies, if they are deemed to
be viable, but oftentimes they leave employees with very little recourse to recoup lost income for
worked time.
Although there are startups created in all types of businesses, and all over the world,
some locations and business sectors are particularly associated with startup companies. The
internet bubble of the late 1990s was associated with huge numbers of internet startup
companies, some selling the technology to provide internet access, others using the internet to
provide services. Most of this startup activity was located in the most well-known startup
ecosystem - Silicon Valley, an area of northern California renowned for the high level of startup
company activity:
- The spark that set off the explosive boom of "Silicon startups" in Stanford Industrial
Park was a personal dispute in 1957 between employees of Shockley Semiconductor
and the companys namesake and founder, Nobel laureate and co-inventor of the
transistor William Shockley... (His employees) formed Fairchild Semiconductor
immediately following their departure...
- After several years, Fairchild gained its footing, becoming a formidable presence in
this sector. Its founders began leaving to start companies based on their own latest
ideas and were followed on this path by their own former leading employees... The
 process gained momentum and what had once began in a Stanfords research park
became a veritable startup avalanche... Thus, over the course of just 20 years, a mere
eight of Shockleys former employees gave forth 65 new enterprises, which then went
on to do the same...
Start-up advocates are also trying to build a community of tech start-ups in New York
City with organizations like NY Tech Meet Up and Built in NYC. In the early 2000s, the patent
assets of failed startup companies are being purchased by what are derogatorily known as patent
trolls, who then take the patents from the companies and assert those patents against companies
that might be infringing the technology covered by the patent.