What’s in a Startup? Hint: It’s more guts than glory
If you’ve ever considered starting a business or working for yourself, you’ve probably given some thought to the familiar models you could put to work.
Not to be confused with a business plan, an organization’s business model describes, at its essence, how it makes money. For the risk-averse businessperson looking for a quick return on investment, franchising can be appealing, especially if it fulfills a local need. While opening a microbrewery or an online e-commerce marketplace certainly takes financial risk, both business models are fairly well established, allowing businesses to scale or fail quickly. For the innovators seeking an adventure, there is the startup path.
Deciding to start an innovative business raises a lot of strategic questions, but with great risk comes the potential for great reward.
- How will you produce and price your goods and services?
- How will you find your initial customers?
- How much will it cost to get to the next revenue goal?
- What do you need help with?
Unless your business model itself is the unique value you are bringing to the market, looking to proven business models can reduce some risk and allow you to focus on the true value that your organization provides. Which business model will work best will depend largely on whether you create products, provide services, facilitate trade, or some combination therein.
Inspired by Carl Jung, Inc.’s 7 business model personalities, identify useful examples of each archetype.
Once you’ve found a model that you think will work, your job is to proof it as soon as possible. Putting your business model to the test early and often saves a lot of time and money, two resources in high demand for every entrepreneur. It’s this process of exploration that makes you a startup.
What’s a Startup?
Not every company goes through a startup phase, depending on how well-established the business model is. The goal of a startup is to transition from prototype to mature company as quickly as possible so it can focus on doing what it does best.
Often referred to as the father of modern entrepreneurship, Steve Blank says that it is primarily the quest for the business model that defines a startup.
“A startup is an organization formed to search for a repeatable and scalable business model.” — Steve Blank
The startup path is the road less traveled for good reason. Innovation is risky and most startups fail. Entrepreneurs build startups because they feel they must.
Six Founder Motivations
When a founder sets out to create a startups they have a goal in mind. Steve Blank classifies these primary motivations into six categories:
- Lifestyle Startups—live their passion
- Small Business Startups — feed their families
- Scalable Startups— born to grow
- Buyable Startups — born to flip
- Large Company Startups— innovate or evaporate
- Social Startups— make a difference
Each of these types of startups and their leaders have unique needs they must meet in order to thrive, from the educational path to capital and everything in between.
The Upside to Startups
In the face of the risk, investors put their money on startups, fully knowing that most will fail. The potential upside to successful innovation makes the risk worth taking.
Fostering healthy startups of all types has the added bonus of contributing to local economic growth.
Research by the Small Business Administration and Kauffman Foundation show that most new jobs are created by young companies. Startups with potential to scale have the added ability to funnel money in from other regions.
The Path to Greatness
As the adage goes, the road to success is littered with failures, and startups are no exception. Successful startups change their business model several times as lessons are learned and the first sales are made. Terms like iterate, pivot, and fail fast/fail cheap are truths entrepreneurs face daily.
Saving time and money as a startup founder means understanding where you lack wisdom and asking for help. Startup founders of all types benefit from access to experienced mentors.
RAIN Eugene’s accelerator programming has a strong mentorship focus, with a rich network of experienced business owners willing to support local startups on their journey. If you are looking for support with your startup, stop in for one of our coffee meetups or open mentoring hours.
Regardless of where you are on your startup journey, there’s a place for you in the ecosystem. Founders: get out of your office, find your local startup community, and get involved in making it more awesome. Not only will you improve your community, you will reap the rewards of exchanging ideas and experience.