The term "startup" usually refers to a small, early-stage company that aims for rapid growth. When we say rapid, we imply 50-100x growth per year. Managing in a rapid expansion environment can be simultaneously exhilarating, disorienting, and taxing for most employees.
For the intent of this guide (and to help you understand the startup landscape), we're likely to widen the term "startup" to include larger companies as well (even up to 1,000 employees). Many of these firms are still growing significantly, perhaps 10 to 20 times annually, but operate more like a large corporation – with developed job functions, more seasoned managers, and greater stability/predictability of hours/work.
Startup Building Products
At Acceleratexinnovations, we advise entrepreneurs to create something consumers desire. It is also advantageous when the founders collaborate on solutions to their problems.
The first step our founders should take is to develop a minimum viable product (MVP) - a version of the concept that works and can be presented to potential customers for feedback. Users and customers can be attracted with MVPs that are iterated over time. In other instances, multiple MVPs fail, and the founders begin again with a new concept or product.
When (or rather, "if") a startup discovers product-market fit, it is a crucial turning point in its development. Users are utilizing the good, customer demand is high, and people may even be recommending it to others. There is unmistakable traction at this point, and the corporation shifts into growth mode, expanding the team to build the goods and company as rapidly as practical.
Startup Making Money
The majority of early-stage firms do not generate revenue, and this is especially true for those that are pre-product market fit. These enterprises are not hopeless; they have typically raised capital and can operate for two to three years without generating revenue. (More to come on fundraising.)
However, we encourage our founders to evaluate the business model as soon as possible. A business model describes how a venture intends to generate revenue, either immediately or in the future. This could involve selling to businesses & consumers, monetizing a marketplace, or even selling ad placements.
Even in the earliest stages of a company, validating a business model is beneficial not only for ensuring the company's survival but also for helping it raise additional capital, if necessary. If a company has a feasible path to profitability, investors are more likely to invest in it than if it has no prospects of generating revenue. Occasionally, a startup requires additional funding because it must reach a significant magnitude before it can generate meaningful revenue. Before advertisers are willing to promote on social media platforms (such as Pinterest, Twitter, or Facebook), sufficient critical mass must exist.
Are Startups Risky?
First, not all ventures carry the same degree of danger. Many later-stage startups have raised 100 crore or ₹ 450 crore more, and they can offer a competitive salary and equity potential. In fact, later-stage startups are frequently attempting to recruit top talent from large technology companies, necessitating compensation commensurate with FAANG.
However, the majority of early-stage businesses generate little revenue. To sustain early product development, these startups raise funds (known as "fundraising") to provide operating capital for the business. They may raise between 10 crore and ₹ 50 crore, which is sufficient to pay a small team of early employees a reasonable salary (with equity) for two to three years. Founders must carefully manage their finances, and at Acceleratexinnovations, we advise our founders to constantly monitor two important business health indicators: burn rate and runway.
- Burn Rate: The monthly expenditures of a business.
- Runway: The number of remaining months a business has based on its funding/bank balance, revenue (if any), and waste rate.