What is a Startup?

Now we are seeing startups occupying an important role in the economy. They represent alternative ideas and mostly emerging in the digital world. Often analysts consider them as the future MNCs. Many of the present day internet titans like facebook, Google and Ola were startups in the past.

There are numerous definitions about startups, providing different criteria to identify them. Management teacher and entrepreneur Bryan Guido Hassin gives a sound definition for startup.

According him startup is a temporary organization used to search for a repeatable and scalable business model.

The term temporary is important as the goal of a startup is to develop into the next stage. This means end of its startup phase. For Hassin, an early stage venture that can’t achieve the rapid scale-up is a small business and is not a startup.

Essentially startup denotes to the early or formation stage of an entity. Startup is a company that is in the first stage of its operations and is designed to scale very quickly. It is this focus on growth, unrestricted by geography which differentiates startups from small businesses. In this sense, a retail shop that started in a town recently doesn’t qualify as a startup.

Venture capitalist Paul Graham says that the essential feature of startup is its fast growth.  “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. The only essential thing is growth. Everything else we associate with startups follows from growth.”

Graham observes that a startup entrepreneur will be facing harder problems than ordinary business people. The trade mark of startup is that “You’re committing to search for one of the rare ideas that generate rapid growth.

Still founders illustrate that a startup is a culture and should not be measured arithmetically. “Startup is a state of mind,” says Adora Cheung, cofounder and CEO of Homejoy, one of the hottest US startups in 2013. All these definition gives following features to a startup.

  • The startup is an entity in the early stage of operation.
  • Startup most probably brings a new business idea which challenges the conventional ones.
  • Startups will have fast growth
  • Startups have no geographical limit in terms of its operation. Hence ordinary retail business entities are not startups.
  • The risk factor for startups will be very high.

In India, the government has unveiled a startup plan and expects that the country can create a vibrant digital economy as it has huge young population supported by large size market.

Startup as per India’s starup policy

Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding Rs 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. Following are the conditions set by the government in the definition of a startup.

a) Up to five years from the date of its incorporation/registration,

b) If its turnover for any of the financial years has not exceeded Rupees 25 crore, and

c) It is working towards innovation, development, deployment or commercializalion of new products, processes or services driven by technology or intellectual property;

Any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’;

Institutions and arrangements are already coming out to support startup ventures. Bangalore has emerged as the fastest growing startup centre in the world along with several other ecosystems.