Startups: a new technological business model



In  the entrepreneurship world, the term startup is increasingly used to refer to emerging companies, usually linked to tech companies that arise after the implementation of an innovative idea leveraged in the use of new technologies.

That is why startups continue to have an exponential growth -practically   unstoppable- due to the innovative component that characterizes them. For Steve Blank, a startup is a temporary organization in search of a scalable and replicable business model. However, this definition contrasts with the ideas of Nelson (2015), who points out that there is no concept associated with its meaning, but the different conceptions require elements in common in each of them, emphasizing on their scalability, approach, philosophy and the market to which they are focused.

On his part,   Román (2016) states that a startup is a company in its initial stage, based on its literal translation, which is “set in motion.” This author points to an important differentiation, where not all startups are created by entrepreneurs and not all start-ups by entrepreneurs are startups; this is where a key element comes into play: innovation.

Companies recognized internationally -among them Google, Twitter, and Facebook- began their trajectory as startups, the reason why they have become a model to follow by many organizations that take their first steps in the world of software development and technology management.

When talking about Startups, we must refer to the Lean Startup method proposed by  Ries (2011), which is based on a cyclical process in three phases: defining the idea, implementing it in the market, and measuring the customer’s reaction to discover what it really wants. This is possible through the development of the minimum viable product (MVP), in the shortest possible time, and then incrementally improving the characteristics of the product following the market demands. This method, part of the “Release Often Release Early” philosophy, framed in real-time feedback for the correction of errors, where the     inclusion of new functionalities does not incur in major expenses, an aspect that represents an advantage in a market that is in constant expansion.

Henshaw-Plath, recognized for being one of the founders of Twitter, supports the Lean Startup method proposed by Ries, identifying as part of this model a series of key “verbs” that define startups: build, test, learn and validate. These phases follow an iterative model, an anti-methodology  that contrasts with the linear processes framed in the traditional methodology. This author suggests to the entrepreneurs to analyze the needs of the environment and adapt them to achieve a product in line with market expectations, rather than imitate existing ideas. This initiative is supported by Paniagua (2015), who says that “in the market, you will have a much better idea of how to solve your project than what could be proposed in Silicon Valley.

Such is the boom caused by the startups that, at the moment, the majority of the companies that are in its initial phase define themselves as startups, without really knowing what this concept implies. From this initiative, several questions arise,  one of the most common being how to know when we are before the presence of a startup?

There are many characteristics that define them, however, there are differentiating elements that allow us to know what it is, aspects that are of great relevance when talking about entrepreneurship. These elements include:

  • - Technological component marking
  • - Innovation-oriented direction
  • - Lower development cost
  • - Scalable business model
  • - Constant communication with the customer
  • - Adaptability to change

It is precisely the last element, its adaptability, that gives it a series of associated benefits, which make startups as attractive to investors as to their current and potential customers.  

Company Startups

As we all know, the tech business is constantly changing, and these companies are characterized by their broad ability to adapt to these changes; this is why they are based on a structure of associated minimum costs that grow exponentially as the product or service offered acquires greater demand in the market, allowing, in turn, a greater and better communication with its customers or users.

The aforementioned gives startups a much faster growth than conventional companies since it allows a much faster recovery of the investment made. In this sense, it is very important to hold events that strengthen the community of entrepreneurs, creating opportunities for organizational growth and become meeting points for potential partners and investors, which drive business scalability.  

TEINES Ratio

When talking about startups, there is a perfect relationship between three components that are essential: TEnology-INnovation-Scalability. For the purposes of this post, we will call it the TEINES relationship.

Technology

Technology is present in all the innovative solutions that characterize companies today. Precisely the need for growth, to generate results according to the market, and to keep in constant development, requires a tech platform that is in line with these requirements, where startups are no exception.

Innovation

Creating unique, differentiated and, therefore, innovative products is the main objective of startups. However, this is a challenge, given the demand that companies in the market that add every day to the growing universe of startups, an aspect that in many ways conditions their survival. To innovate we must be informed, always in the constant search for new needs, whose response is represented by the technological implementation of novel responses to changes.

Scalability

One of the keywords of startups is scalability. The idea is to generate the products developed on a large scale, without incurring in the increase of production costs. The secret is in the adaptability of the product so that with few changes it can solve multiple users’ needs. This gives you a potentially unlimited scale.  

New startup

Ideas represent the raw material to create a startup, as they go hand in hand with innovation. However, this process is not so simple, there are theories that establish that at least 60 ideas are needed to result in an innovation, the quality of said ideas to  get new products as a result being important. The human being has an innate ability to create; you just need an original idea to take the first step in the world of startups.

Once we have taken this step and we have a winning idea, we must prepare ourselves to identify the relevant aspects, as well as the tools with which we have to channel it and put it into execution, with technology being the perfect ally to give continuity to this process. From this point, what remains is to evaluate the viability of the idea to get to work.

Although there are many elements that play an important role in the development of a startup, among which stand out the technological platform, analytical capacity, as well as the implementation of techniques that stimulate an entrepreneurship, such as the  co-build , a point in favor of guaranteeing the scalability of a startup is the creative capacity of those who integrate it, that is to say, the capacity to create and change, where leaders are, in themselves, co-creators of the startup. Only creative organizations can develop creative individuals.  

Tech startup companies

One of the main problems that entrepreneurs have in the current economy is the high risk that comes implicitly with investing in an entrepreneurship; this fact has implications both for investors and new entrepreneurs who wish to make the leap in the world of entrepreneurship. So how do you take the lowest possible risk when creating a startup? Starting from this premise, the methodology of Lean Startup proposed by  Ries arises. This methodology, when used correctly, minimizes the risks implicit in the creation of a startup, in a process framed in build, measure and learn, to generate innovation. This is possible by giving due importance to great ideas and great visionaries.

Eric Ries learned from his failure, using a different approach to minimize risk in a replicable way, recognizing, in the first instance, that anyone can be an entrepreneur. Next, it frames the enterprise in a specific type of administration, with its particular characteristics, highlighting as part of them the accounting innovation. Each of these elements ratifies the fact that the enterprise gives replicable results with a low associated risk, provided that the correct methodology is applied, the Lean Startup being one of them.

Entrepreneurship and, consequently, the creation of startups, are essential for economic growth and development, bringing, as a result, a society aware of the risks involved in this activity, but with the incentive necessary to implement a great idea.

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