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Everyone who thought about starting a business heard the name of Paul Graham. He is a businessman, programmer, and innovator. His achievements are of great importance in the field of information technology, and his biography and success story are studied in detail by many young people who want to create an innovative start-up. This person is a worthy example. He proves that if you want to become rich, you need to work hard and study every day.
The creation of start-ups today is a promising opportunity to succeed and earn much money.
Almost all bloggers write about it; it is discussed at forums and spoken about by all news IT editions. The startup is an Internet project that has an ambitious and innovative idea and a promising product. Startups are called mobile enterprises with limited resources and young firms that are still at the stage of foundation and development or were created recently.
At the heart of any startup should be a unique idea or innovation.
Creators should be pioneers in that they have conceived otherwise there will be no success. The pioneer start-up company is the Hewlett-Packard Corporation, founded in 1939 by two yesterday’s students. Today the whole world knows about this company. In fact, these are ideas in which you can invest money. The term was introduced by Forbes in August 1976 and Business Week in September 1977 to refer to companies with a short history of operating activities. Startups are most frequently associated with IT, although they are not limited to this industry.
Start-up companies began to massively enter the market at the beginning of the last decade, but to this day the number of such business projects has not declined, although they seem rather risky. Successful examples of our days are Wikipedia (2001), facebook (2004), YouTube (2005), etc.
There are some distinctive features of such a business model. The project is launched in the shortest time, sometimes in less than six months, but if this is a high-tech company, the possible term can reach one year. Creating an innovative business does not require a lot of time, and therefore preparation, prototype, launch, and development occur very quickly. At the heart of the business should be such an idea, which has never been realized before. Novelty and usefulness of something people want should attract customers in the future. The startup attracts investments at the time of its inception and investors, in this case, invest money in the idea, and not in a successfully operating firm.
Only 30% of start-ups stand on the market for over a year, and only 15-20% exist for 2 years or more. This is due to the high risk of an unsuccessful introduction of a new idea. The purpose of creating a startup is in most cases, its sale by going to an IPO. There are cases when a founder managed to sell his project for millions of dollars. There is an existence of a creative team of friends, partners, or classmates with well-coordinated teamwork has a higher chance of success. The startup is rarely raised by one person.
But it must be said that a start-up is a business, or rather a risky, innovative business. The financing of startups has long been put on stream. For today, their financing is carried out by business angels and venture funding. Business angels are private investors who independently determine the objects for financing. For many creators of similar projects, it is a mystery how to find business angels and attract the attention of venture funds. Angels are investing in the business at the stage of formation. They do not interfere in the affairs of the company and do not insist on an urgent return of funds. Their main goal is to make a profit for a long time. Venture funds invest in the start-ups with the help of their depositors’ funds and finance projects that have medium to high risk, but good yield potential. They can also invest in projects at an early stage. More frequently they prefer companies that do not have the means to fully launch.
Many of the complexities of start-up companies involved in attracting investments are due to the fact that potential investors can not understand which offer is promising and which is unprofitable. As a result, quite frequently unreasonable decisions are made. It greatly increases the risk and requirements for equity participation in the project.
If to analyze this issue from the perspective to guide investors, the “right” start-up must have several properties. It must be a really good idea, for which they will pay. Secondly, the team needs to have a clear business development plan. There is also a need for a strategy to pay off financial investments. Fourthly, the team should be headed by competent managers who are able to control the company and achieve success by identifying, creating or using innovative services, goods or technologies users like. Evaluating the idea of a startup, it is important for an investor to make sure that it has a significant competitive advantage. It can be due to the uniqueness of the product, its properties or the innovative format of promotion. In this case, the key point of the analysis is an adequate assessment of the enterprise’s prospects. The team should also follow the designated development vector.
It is also important to evaluate the quality of a business model. The main stages here are the analysis of plans for the promotion of goods or services, the assessment of the level of market demand, the study of the possibilities of scaling the business model. It is the chance of its expansion without changing the model of enterprise development. The team should also have realistic and thoughtful financial calculations.
One of the most important components of the success of start-up projects has always been a strong management team. To objectively assess the capabilities and potential of the team, it is necessary to analyze its features and experience. A potential investor should investigate the following issues.
Investing in startups has certain benefits. One of the keys to success, from the perspective of investors, is the young age of the creators. They are not burdened with either family or work and can devote themselves entirely to the work on the project. Today, there are special services that help start-ups and investors to find each other. A number of companies independently are engaged in search of interesting projects, demanding from candidates only a clear description of their plans. It is not so difficult to find an investor, but a good idea should be clearly formulated.
Today start-up projects are an entire industry. In the future, it is expected that interest in them will only increase.
However, we should not forget that according to various estimates, from 5 to 10% of projects become successful startups. The areas of health protection, financial services, consumer goods and services, “green” technology, medical equipment, biopharmaceuticals, media projects, social networks, semiconductors, and telecommunications are considered as the most promising industries for the next few years.
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