Startups. What do we know about them?
It is fairly well known that startup businesses make serious money. You can figure out this by numerous successes of startup companies, their quick advance on the commercial market and rumors about huge investments. Why does all this happen?
After a 23-year-old founder of a popular startup became a billionaire many people understood that a startup is a thing that can bring a lot of money. A real startup boom arose after “The Social Network” movie and after that many IT companies started to work in this direction. The idea was simple – everyone wants to get a piece of this pie. Today it resembles a gold rush.
Startup is all about money. Do you remember physics and the Law of Conservation of Energy? If there is someone who gets money, so there is someone who spends it. There is one logical question – why startups are so highly encouraged and promoted?
Startup creation involves the implementation of some innovations and know-how. The whole process of scientific researches and development of new products was very expensive: in order to bring a new product to the market, you had to (in most cases) open a new production factory. Scientists lack those money, so this activity was a prerogative of states or big corporations. In other words, the rich get richer. Only some time later the technological progress allowed ordinary people to open their own business or factory to make the business field more diversified.
At the moment everything you need to create a startup is a notebook. It’s not a joke. For example, you can easily create a working prototype of any popular services in just a few days while sitting in your favorite sofa. Then this prototype will act as a basis for a big company. As simple as that.
About 50 years ago venture capital funds began to appear in the United States. These funds invested money in different innovative projects and companies. With the development of technologies and their accessibility to ordinary people, the number of companies represented on the market was growing gradually as well as the industry itself.
After the emerge of the Internet, the number of new IT-startups was drastically increased, so, the number and the scale of venture capital funds was increased accordingly.
Venture capital is a highly risky investments. Venture capital funds always know that not all the projects they have invested will pay off. Therefore, they analyze and plan different projects and companies as “investment factories” and complete only a few deals a year.
A particular company can be not only created to generate revenue, but also sold out once or twice in order to allow ordinary people to get a part of a company in shares.
The estimated cost of different startups is growing continuously due to an increasing number of attracted users, thus making IT-projects even more attractive to investors. In such a case, investors can get 10 times more money than they have invested previously in the development of a project. Furthermore, a startup receives investments from 2 to 5 times, which means that one investors that have invested money at the earlier stages of development, may sell their part of the company to other investors later for a much greater amount of money.
As research show, not all startups are successful, however, venture capital income from successful projects far exceeds investments in failed ones. That’s why it is a very competitive way of popularization startups in attracting new minds among which may be a new potential Zuckerberg.
Conclusions on the merits and flaws of startups
As you can see, startups are an integral part of the whole IT world and IT people. There are lots of them who want to start their own revolutionary project in order to move this world further, get rich and popular. The thing here is that don’t have to be a complete genius to create a successful startup, but you should have a strong mind and decent luck to make the stars align.