What is a Startup? Definition and core features

Emerging companies, particularly those linked to innovation and technology, that rely on the internet and social media, whether to operate or to build their brand. These are the key elements behind the startup phenomenon, a concept that has transformed the global business landscape and enabled many professionals to turn their ideas into reality. In a different context, bringing these ideas to life would have been far more difficult.

This shift has been driven by investors and financial experts who are willing to support talent developing highly innovative business ideas. As a result, a favorable environment has emerged, one that encourages concepts that might once have been dismissed. Business plans that once sat in a drawer are now becoming successful companies such as Wallapop, Glovo, and Uber. These were once considered startups, and today they are success stories studied in business schools and universities.

To better understand the startup concept, there are several key aspects that help define what these companies truly are.

What is a startup and how does it work?

A startup is a newly created company that aims to develop an innovative product or service, introducing a potentially disruptive idea into a market where competition already exists. In some cases, startups even create entirely new markets from scratch, as happened with social media platforms.

In their early stages, startups usually consist of a small, highly motivated team working intensively to bring their solution to market as quickly as possible. Let’s take a closer look at the characteristics that define what a startup is and how it operates.

• Scalability: the ability to grow rapidly, reaching a large number of customers in a short period of time with limited resources.
• Replicability: the capacity to reproduce processes that have been validated on a small scale and apply them to larger markets.
• Built-in innovation: innovation is at the core of every startup, as it seeks to offer solutions to needs or processes that have not yet been addressed in the market.
• Temporary nature: a startup represents the initial and transitional phase in a company’s lifecycle, typically characterized by rapid growth and development.

Startups tend to be more open to new ideas and more adaptable to change than large corporations. In many cases, they receive funding from external investors such as business angels or venture capital funds. However, in the early stages, they often rely on the resources of their founders. For this reason, anyone looking to launch a startup needs more than just innovative ideas; they also need solid financial knowledge, which can be developed through programs such as a Bachelor’s degree in Business Administration or, even more effectively, a Master’s in Finance.

Types of startups and key stages of development

Startups can be classified into different types. The following is one of the most widely recognized classifications:

• Scalable startups: businesses with proven efficiency that can grow quickly without requiring excessive resources. These are typically companies that have raised at least one million dollars in funding and have maintained steady growth of around 20 percent over the past three years.
• Social startups: their goal is not primarily to generate profit, but to improve a product or service that creates value for a community or a specific market niche.
• Buyable startups: similar to small and medium-sized enterprises, their goal is to be acquired by larger corporations that can provide additional resources to scale the business.
• Primary startups: founded by entrepreneurs who aim to turn the company into their main life project, with no intention of selling it.
• Secondary startups: developed within a parent company or business group, often in an environment that allows experimentation using existing resources.

Most startups go through several key stages of development, including:

1. Defining the core product or service: usually starting with a minimum viable product, known as MVP, a basic version that allows the idea to be tested in the market with minimal effort.
2. Measuring early results: assessing how the market responds and whether the solution meets the needs of the target audience.
3. Evaluation and decision-making: determining whether to move forward with the prototype or make adjustments.
4. Product development and commercialization.
5. Consolidation and strategic planning: deciding whether to continue growing the company independently or to sell or integrate it into a larger organization.

To better understand how startups operate and how their development can be evaluated, it is also important to consider the role of digital business models when building companies linked to technology and innovation.

How are startups funded?

Startups have access to a variety of funding sources, ranging from support from family and friends to investment from external capital. The most common options include:

• FFF, Family, Friends, and Fools: initial funding provided by close contacts to help launch the business.
• Business angels: private investors who typically contribute up to around 50,000 euros and may also provide guidance or mentorship.
• Seed capital: funding aimed at early-stage startups that are still developing or not yet profitable.
• Venture capital funds: external investors who finance high-growth potential projects, assuming higher risk in exchange for equity.

Examples of successful startups

One way to identify successful startups is by looking at major acquisition deals. Some of the most notable examples in recent years include:

• Glovo: the delivery platform was acquired by the German company Delivery Hero in a deal worth 780 million euros.
• Privalia: an online private sales platform for fashion and lifestyle products, acquired by Vente-Privee for nearly 500 million euros.
• Cabify: a ride-hailing platform that reached a valuation of 1.4 billion euros after receiving investment from major companies and private equity funds.
• Wallapop: a marketplace for second-hand goods, valued at 771 million euros and competing with global platforms such as eBay.

These are just a few examples of startups that have succeeded by introducing disruptive ideas and reshaping their markets. Whether through approaches such as the lean startup method or other innovation frameworks, new business opportunities continue to emerge in a constantly evolving market, driven by entrepreneurs who are able to think beyond the conventional.