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A startup company or start-up is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry.

Contents 1 Evolution of a startup company 2 Startupers 3 See also 4 Further reading 5 References

[edit] Evolution of a startup company

Startup companies can come in all forms, including those that are simply life-style companies, but the phrase "startup company" is often associated with high growth, technology oriented companies. Investors are generally most attracted to those new companies distinguished by their risk/reward profile and scalability. That is, they have lower bootstrapping costs, higher risk, and higher potential return on investment. Successful startups are typically more scalable than an established business, in the sense that they can potentially grow rapidly with limited investment of capital, labor or land.

Startups enjoy several unique options for funding. Venture capital firms and angel investors may help startup companies begin operations, exchanging cash for an equity stake. In practice though, many startups are initially funded by the founders themselves. Factoring is another option, though not unique to start ups.

A critical task in setting up a business is to conduct research in order to validate, assess and develop the ideas or business concepts in addition to opportunities to establish further and deeper understanding on the ideas or business concepts as well as their commercial potential.

If a company's value is based on its technology, it is often equally important for the business owners to obtain intellectual property protection for their idea. The newsmagazine The Economist estimated that up to 75% of the value of US public companies is now based on their intellectual property (up from 40% in 1980).^[1] Often, 100% of a small startup company's value is based on its intellectual property. As such, it is important for technology oriented start up companies to develop a sound strategy for protecting their intellectual capital as early as possible.^[2]

Startup companies, particularly those associated with new technology, sometimes produce huge returns to their creators and investors – a recent example of such was Google, whose creators are now billionaires through their share ownership. However, the failure rate of startup companies is very high. Based on a research, founder CEOs of high-tech companies can typically expect their stock to be worth about $6,500,000 (statistical average) if the company succeeds in going public(in 1997)^[3]

While there are startup businesses created in all types of businesses, and all over the world, some locations and business sectors are particularly associated with startup companies. The Internet bubble of the late 1990s was associated with huge numbers of internet startup companies, some selling the technology to provide internet access, others using the internet to provide services. Most of this startup activity was located in Silicon Valley, an area of northern California renowned for the high level of startup company activity.

A company may cease to be a startup as it passes various milestones, such as becoming profitable, or becoming publicly traded in an IPO, or ceasing to exist as an independent entity via a merger or acquisition.

[edit] Startupers

Startupers is a term used in the software industry to describe people involved in the creation of high tech startups. Typically, startupers are entrepreneurs, venture capitalists, software engineers, web developers, and others involved in the ground level of a new high tech venture.

[edit] See also

Business incubator Business plan dot-com company Entrepreneurship Exit strategy Factoring (finance)

IPO Liquidity event Not Just For Profit Private Equity Silicon Valley and Green Technology Valley Stock market bubble Venture capital

[edit] Further reading

• "Burn Rate:How I Survived the Gold Rush Years on the Internet", Michael Wolf, 1997, ISBN 0-684-84881-3

[edit] References

v • d • e Topics on private equity and venture capital Basic investment types Bootstrap funding · Venture · Buyout · Mezzanine · Growth · Secondaries · Equity co-investment History History of private equity and venture capital · Early history of private equity · Private equity in the 1980s · Private equity in the 1990s · Private equity in the 21st century Terms and concepts Buyout Financial sponsor · Management buyout · Divisional buyout Venture Seed money · Startup company · Angel investor · Venture capital financing · Pre-money valuation · Post-money valuation · Venture round · Venture debt Structure Private equity firms and funds · Limited partnership · Limited liability company · Carried interest · Publicly traded private equity · Private Investment in Public Equity (PIPE) Investors Institutional Investors · Pension funds · Insurance companies · Endowments · Investment Banks · Commercial Banks · Fund of funds · High net worth individuals · Family offices · Sovereign wealth funds Related financial terms Undercapitalization · Initial Public Offering (IPO) · Mergers and acquisitions · Leverage · High-yield debt · Capital structure Private equity and venture capital investors · Private equity firms · Venture capital firms · Portfolio companies