Monday 11 October 2010

What is a startup?

I've heard many definitions about what startup is. Particularly in blogs and tech comunities, startups are becoming synonimous with internet companies. Interestingly, Wikipedia offers a perfect answer: startup is a company with no history!

So how come that the startup concept is so vibrant in the tech community? Because in order for any company to succeed, it needs capital, team and partners. All this is difficult to obtain if you have no history. That's why tech startups came up with inovative ways to obtain those resources.

A significant factor in the story is also the fact that IT and internet advances simplified the way we do business. In fact you need a computer and an internet connection, a few hundred dollars and you're ready to roll, world wide! That's profoundly different to local mill, backery or local delivery business. They all need significant capital investment and when you're there, your set for many years, either your run with it, or you close. In software world that's much easiser.

Given the facts it's interesting to see how tech startups are sometimes rigid and how their investors don't get the difference. It's actually harmful to a startup to demand long term plans as if it was a traditional business.  It locks them in and limits their flexibility and ability to leverage one advantage they have: cost effectivness. I think we need a new model.  

No comments: