What is a Startup?

09-Jun-23

33 min

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Startup businesses are the lifeblood of the modern economy, bringing fresh ideas and creating jobs along with them. But launching a new enterprise can be daunting, especially when it comes to deciphering the legal implications and regulations. That’s where ��Ƶ comes in: with millions of datapoints teaching its AI what constitutes a successful startup and an extensive community template library - anyone can draft and customize high quality legal documents without paying a lawyer.

The term ‘startup’ refers to an idea or business model that has yet to be tested in the marketplace, requiring risk-taking and financial investment - as well as some luck - from entrepreneurs who launch them. And while ideation is often the focus for those taking their first steps, it’s important to remember that not understanding the legal landscape around startups can lead to costly fines or penalties, or worse.

From registering a business as an LLC or corporation through to obtaining licenses and permits, there are many different things to consider when building up your startup from scratch. It’s also wise to familiarize yourself with contract agreements such as employment contracts, confidentiality agreements or nondisclosure agreements which protect both you and investors should any issues arise further down the line.

In addition, entrepreneurs should take into account intellectual property laws – these could have just as much impact on their success than any other part of setting up their business. Understanding how regulations work together is key; not only do they need to be followed but they should be used strategically too with risk assessment taken into consideration in order for businesses to succeed in full legality.

Ensuring regulatory compliance is one part of why startup matters so much; being aware of potential risks is another essential element which requires assessment before pushing ahead with turning that dream into reality - finding out what may lie hidden beneath that promise of success is vital if you want your venture off on the right foot!

At ��Ƶ we understand this at our core – we’re committed to providing free guidance on all legal aspects surrounding startups through our step-by-step guide which doesn’t require you having an account with us at all – we just want everyone who takes a plunge into entrepreneurship know exactly what they’re getting themselves into! Our community template library provides access to necessary templates so no matter where your new venture takes you – make sure you’re covered by understanding why startup matters today! Read on below for more information about our step-by-step guide and how you can gain access our template library right now!

Definitions

B2B: Business-to-business. The term used to describe companies that market their products or services to other businesses.

B2C: Business-to-consumer. The term used to describe companies that market their products or services to individual consumers.

Non-profit: An organization or business that is focused on providing social services, rather than generating a profit.

Social enterprise: A type of business that combines a social mission with a for-profit business model.

Angel investors: Wealthy individuals who provide capital to startups in exchange for equity.

Venture capitalists: Firms that provide capital to startups in exchange for equity.

Crowdfunding: The process of raising money from a large number of individuals.

Market research: The process of collecting information about a target audience in order to gain an understanding of their needs and preferences.

Mentor or advisor: An experienced individual who provides guidance and advice to startups.

Business plan: A document that outlines a company’s mission, objectives, and strategies for achieving success.

Financial plan: A document that outlines how a company will generate revenue and manage expenses.

Validate: To confirm the accuracy or truth of something.

Pivot: To adapt quickly to changing market conditions.

Agile: The ability to respond quickly to change.

Definition of a startup
Types of startups
B2B
B2C
Non-profit
Social enterprise
Key characteristics of a successful startup
A clear mission
A strong team
A scalable business model
A solid financial plan
Initial steps for creating a startup
Identify a problem and create a solution
Validate the problem and solution
Research your industry and target market
Develop a business plan
Outline a financial plan
Find a mentor or advisor
Funding for a startup
Self-funding
Crowdfunding
Angel investors
Venture capitalists
Common mistakes to avoid when starting a business
Overestimating the market
Not doing enough research
Not having a solid business plan
Not having a financial plan
Not having a solid team
Not having a clear mission
Tips for staying competitive in the startup industry
Stay abreast of industry trends
Leverage technology to optimize processes
Utilize resources from relevant organizations
Stay agile and pivot quickly
Focus on customer service
Utilize digital marketing strategies
Benefits and risks of launching a startup
Benefits
#1. Low overhead
#1. Flexibility
#1. Room for creativity
Risks
#1. Financial losses
#1. Uncertainty
#1. Time commitment
Resources for entrepreneurs
Books
Online resources
Mentors and advisors
Networking events
Conferences
Industry associations
The importance of networking and collaboration
Builds relationships
Opens up access to resources
Enhances creativity
Connects entrepreneurs with potential partners and investors

Get started

Definition of a startup

Understand the definition of a startup: a business that is in the process of developing a product or service in order to bring it to market
Learn the different characteristics of a startup such as its size, purpose, and financial model
Research the different types of startups and the advantages and disadvantages to each type
Understand the risks associated with starting a business
Know when you have a complete understanding of the definition of a startup and can move on to the next step

Types of startups

Understand the different types of startups, such as B2B, B2C, and D2C
Learn about the advantages and disadvantages of each type of startup
Research the types of startups that are most successful in your industry
Identify the type of startup that aligns best with your business model and goals

Once you have a good understanding of the various types of startups and their advantages and disadvantages, you can check this off your list and move on to the next step.

B2B

Research what a Business-to-Business (B2B) startup is and the differences between B2B and Business-to-Consumer (B2C) startups
Understand the challenges and opportunities associated with B2B startups
Learn about the different types of B2B startups
Identify the types of customers that B2B startups typically target
Understand how B2B startups use technology to reach their customers

You’ll know you’ve completed this step when you have a good understanding of what a B2B startup is, the challenges and opportunities associated with it, the different types of B2B startups, the types of customers that B2B startups typically target, and how B2B startups use technology to reach their customers.

B2C

Understand the basics of a Business-to-Consumer (B2C) startup. B2C startups are companies that offer goods and services directly to consumers, as opposed to business-to-business (B2B) companies which offer goods and services to other companies.
Research different successful B2C startups and their business models to get a better understanding of the key factors that make a B2C startup successful.
Research marketing strategies for B2C startups and think about the best way to reach your target market. Consider using online marketing channels, such as social media, email, and search engine optimization (SEO).
Develop a pricing strategy for your B2C startup. Research competitors’ prices and figure out what works best for your business.
You’ll know when you can check this off your list when you have a basic understanding of B2C startups, have researched successful B2C startups and their business models, have developed a marketing strategy, and have created a pricing strategy.

Non-profit

Understand what a non-profit is and how it differs from the other startup types
Research non-profit organizations and learn how they operate and how they are structured
Assess the advantages and disadvantages of forming a non-profit organization
Consider the various legal and tax implications associated with non-profit organizations
Determine if forming a non-profit organization is the right option for your startup

Once you have a clear understanding of what a non-profit is, what it does and what the benefits and drawbacks are, you can check off this step and move on to the next step.

Social enterprise

Understand the concept of a social enterprise: it is an organization that applies commercial strategies to maximize improvements in financial, social, and environmental wellbeing.
Learn how a social enterprise is different from a traditional business: the primary focus of a social enterprise is to maximize social benefit and not profits.
Research how social enterprises are structured, how they generate revenue and how their profits are reinvested back into the organization.
Become familiar with key values of social enterprises, such as transparency and accountability, as well as the principles that guide their operations.
Understand the various models social enterprises can take such as cooperatives, non-profits, and hybrid models.

Once you have a solid understanding of the concept of social enterprise and its various models, you can check this off your list and move on to the next step.

Key characteristics of a successful startup

Set a clear mission, vision, and purpose: Every startup needs to have a mission, vision, and purpose that guides its operations and decision-making.
Have a sound business model: A successful startup needs to have a sound business model that can generate revenue and be financially sustainable.
Focus on customer needs: A successful startup should focus on understanding and meeting customer needs and have a clear strategy for doing so.
Identify and solve problems: A successful startup should identify and solve problems, and have a plan to do so.
Build a great team: A successful startup should have a great team with the necessary skills and expertise to execute its mission.
Develop a competitive advantage: A successful startup should have a competitive advantage that will set it apart from its competitors.

You’ll know that you can check this off your list and move on to the next step when you have a clear understanding of the key characteristics of a successful startup and have identified any potential gaps in your own startup.

A clear mission

Determine the core mission of the startup
Create a statement that expresses the goal of the business
Ensure the mission is simple, clear, and achievable
Identify the core values of the business and how they will influence the mission
Use this mission to inform and direct all decisions within the business
When you have a clear mission statement, you can then move on to the next step.

A strong team

Identify the skills and experience the team needs to achieve the startup’s mission
Choose the right people who have the right mix of skills and experience to make the mission a reality
Assess the team’s strengths, weaknesses, and potential risk factors
Establish clear communication channels and decision-making procedures
Monitor team performance and make adjustments as needed
When the team is in place and performing as expected, you can move on to the next step!

A scalable business model

Define the business model for your startup: what is the product or service you plan to offer, who is the target customer, what is the pricing model, and how will you position the business in the market?
Create a plan to scale up the business model: what resources will you need to increase production or delivery, and how will you maintain profitability?
Research and develop any additional resources that may be necessary to support the scalability of the business model (e.g. technology, operations, marketing, etc.).
Test the scalability of the business model with a pilot program or limited launch.
Evaluate the success of the pilot program or launch and make any necessary adjustments to the business model.

Once the business model is developed and tested, you can move on to the next step.

A solid financial plan

Identify funding sources: Consider angel investors, venture capital firms, and other sources of capital.
Create a financial plan: Develop a budget, cash flow statement, and other financial documents to support the startup.
Analyze the financial risks: Consider the costs associated with launching and running the business, and evaluate the risks associated with the venture.
Secure financial backing: Take the necessary steps to secure the financing needed to launch and sustain the business.

When you can check this off your list: You will know you can check this off your list when you have identified funding sources, created a financial plan, analyzed the financial risks, and secured financial backing.

Initial steps for creating a startup

Identify a business idea and conduct market research to validate its potential
Develop a business plan that outlines the purpose, strategy and goals of the startup
Establish a legal structure for the startup and register the business with the relevant government agencies
Secure startup funding through a variety of sources such as venture capital, angel investors, crowdfunding, etc.
Hire key personnel and build a team to help execute the business plan
When you have identified a business idea, conducted market research, developed a business plan, established a legal structure, and secured startup funding, you can move on to the next step.

Identify a problem and create a solution

Brainstorm areas of interest or industries you’d like to work in
Research pain points or areas of improvement in those industries
Identify a problem that you think needs a solution
Research existing solutions to the problem
Brainstorm ideas for how to solve the problem
Develop a prototype that solves the problem
Test the prototype with potential customers
When you have a working prototype that addresses the problem, you can move on to the next step: validating the problem and solution.

Validate the problem and solution

Research the marketplace and industry to see if there is a need for your product or service.
Use customer surveys, interviews, and feedback to validate the need for your product or service.
Test your solution with potential customers and gather feedback.
Evaluate the feedback and use it to adjust your product or service as needed.
Refine and test your product or service until you are confident that it is ready to be launched.
Once you have completed the validation process, you can move on to the next step.

Research your industry and target market

Brainstorm potential markets and industries to target with your startup
Research the competitive landscape and customer trends in the industry
Analyze the potential customer base, target markets, and industry trends
Identify customer pain points, needs, and wants
Identify potential competitors and their weaknesses
Once you’ve done your research and have a better understanding of the industry, customer potential, and competitive landscape, you can check this step off your list and move on to developing a business plan.

Develop a business plan

Research competitors: Who are the top players in your industry? How do they make money?
Define your target customer: Who are you selling to? What are their needs and wants?
Develop your value proposition: What makes your business unique? How will you stand out?
Outline your product/service: What features will it have? How will it be priced?
Develop a marketing plan: How will you reach your target customer? What channels will you use?
Create a financial plan: How much capital do you need to get started? What are your expected costs and revenue?

When you can check this off your list:

When you have a detailed business plan that covers the above items.

Outline a financial plan

Create a spreadsheet with a list of all expenses associated with launching your business
Include costs associated with office space, equipment, supplies, taxes, payroll, and other miscellaneous costs
Develop a budget for each area of expense that is realistic and achievable
Research methods of cost-cutting and set goals to help keep costs down
Identify potential sources of funding, such as investors, loans, or grants
Estimate the amount of money it will take to get your business off the ground and running
When you have an accurate financial plan in place, you can move on to the next step.

Find a mentor or advisor

Research and contact potential mentors or advisors who have expertise in the same industry your startup is in
Ask to schedule an informational interview with them to discuss their experience and knowledge
Ask them if they are interested in becoming a mentor or advisor for your startup
Make sure to listen to their insight and feedback
When you find a mentor or advisor who is a good fit, discuss the details of your arrangement
Make sure to create an agreement that outlines the expectations and terms of your mentor/advisor relationship
When the arrangement is finalized, you can check this off your list and move on to the next step.

Funding for a startup

Research different types of funding options such as venture capital, angel investors, loans, and crowdfunding
Evaluate which type of funding is most suitable for your startup
Research potential investors, such as venture capitalists and angel investors
Prepare a detailed business plan and financial projections to present to potential investors
Reach out to potential investors and present your business plan
Negotiate terms and secure the funding
When you have secured the funding, you can move on to the next step in the guide.

Self-funding

Research the different ways you can fund your startup yourself, such as using personal savings, taking out a loan, or using credit cards.
Consider the pros and cons of each self-funding option for your startup.
Determine which self-funding option best fits with your startup’s business model.
Determine the best way to track and manage your startup’s finances.
Once you have completed your research, selected the best self-funding option, and set up a financial management system, you can check this step off your list and move on to the next step.

Crowdfunding

Research crowdfunding platforms such as Kickstarter, Indiegogo, and GoFundMe
Gather the necessary materials to create a successful crowdfunding campaign, like a video, website, and rewards for backers
Create a landing page for your crowdfunding campaign and promote it through your website, social media and email
Monitor the progress of your campaign and respond to questions and concerns
Reach out to potential backers and promote your project to them
Track the progress of your campaign’s fundraising goals
Celebrate when you reach your fundraising goal and thank your backers
You’ll know you’ve completed this step when your campaign has reached its fundraising goal.

Angel investors

Understand what angel investors are: Angel investors are wealthy individuals who provide capital to early-stage companies, with the expectation of making a return on their investment.
Research angel investment trends: Look into angel investment trends to find out the current angel investment landscape and understand the opportunities available.
Reach out to angel investors: Develop a plan to reach out to angel investors, including a pitch deck, business plan, and executive summary.
Negotiate terms of the investment: Negotiate the terms of the angel investment, including the size of the investment, the type of security, and the repayment terms.
Close the deal: Once the terms are agreed upon, close the deal and start working with the angel investor.

When you can check this off your list and move on to the next step: When the deal is closed and the angel investor has provided the capital to the early-stage company, you can move on to the next step.

Venture capitalists

Understand the role venture capitalists play in the startup world
Research what venture capitalists look for when investing in a startup
Reach out to venture capitalists to discuss potential investments
Put together a pitch deck to present to venture capitalists
Follow up with venture capitalists after you present your pitch
Once you have a venture capitalist interested in investing in your startup, negotiate terms and sign an agreement
You’ll know you’ve completed this step when you’ve negotiated and signed an agreement with a venture capitalist.

Common mistakes to avoid when starting a business

Do not underestimate the amount of time and money needed to start a business
Do not neglect to define and focus on a target market
Do not copy existing ideas and try to pass them off as your own
Do not be unrealistic about the success you can achieve in the short-term
Do not forget the importance of customer service

You will know you can check this off your list when you have done research into the common mistakes to avoid when starting a business and have made a plan to ensure that you do not make any of these mistakes.

Overestimating the market

Understand the size of the market that you are targeting
Understand who your target customers are and their needs
Research the competition and whether there is enough demand for your product or service
Do not overestimate the market size and potential customer base
Make sure to conduct market research and validate demand for your product or service
Once you have conducted market research and identified a target market and customer base, you can move on to the next step.

Not doing enough research

Research the industry you wish to enter and the competition that exists within it.
Read up on the latest news and trends within the industry.
Talk to industry experts and potential customers about the market.
Research customer needs and preferences.

Once you have done enough research, you will have a good understanding of the market and customer needs, and can move on to the next step.

Not having a solid business plan

Take time to evaluate the resources you have available, such as your team and capital, and create a plan that outlines how you will use them to reach your goals.
Consider the products or services that you plan to offer and how they will be marketed.
Review the legal and administrative aspects of starting a business and make sure that you understand the obligations you’ll have to comply with.
Analyze your competitors and figure out how you will differentiate your business.
Develop a timeline with clear objectives and milestones.

When you have all these elements in place, you can be sure you have a solid business plan and can check this off your list and move on to the next step.

Not having a financial plan

Understand the basic financial requirements of a startup
Research how to create a financial plan
Develop an income and expenditure model
Outline all potential sources of income
Estimate the costs associated with launching and running a business
Make a realistic budget
Make sure you have enough funds to get started and keep the business running
Once you have a financial plan in place, you can move on to the next step.

Not having a solid team

Identify your core team: who are the founders, who is the CEO, and who will be responsible for each area of the company
Make sure everyone on the team has the skills, experience, and commitment to make the company successful
Develop a team structure to ensure that everyone’s roles and responsibilities are clearly defined
Set up team-building activities and processes to ensure team members are working well together and understand each other’s roles
Establish a timeline for when the team will be fully functioning
You will know you have a solid team when everyone is working together harmoniously and all critical roles and responsibilities have been filled.

Not having a clear mission

Define the mission of your startup
Make sure that your mission is measurable and achievable
Ensure that your mission is aligned with the reality of the market and is feasible
Make sure that your mission is specific and clear enough for team members to understand
Ask others for feedback on the clarity of your mission
Once you have a clear mission, make sure to communicate it to the team and ensure everyone is on the same page

Once you have defined a clear mission, you can check it off your list and move on to the next step.

Tips for staying competitive in the startup industry

Follow your competitors and their industry moves: Keep a close eye on what your competitors are doing and how they are doing it. Research the industry and be aware of the latest trends.
Read industry publications and blogs: Reading industry publications and blogs can help you stay informed on the latest developments and help you stay competitive.
Network: Make sure to n