A Guide to Start-ups

Written by Coursera • Updated on

A start-up is a company in the early stages of existence that, oftentimes, has a business model centered around a product or service that fills a gap in the marketplace.

[Featured image] Two co-workers work together on a whiteboard.

Start-ups tend to have big goals to change long-established operations, rules, or understandings about their industry, making them high-risk, high-reward businesses.

These lofty aims are typically the differentiating factor between a start-up and any other type of new business. In this article, we’ll further explore what makes a start-up a start-up, their importance to our business and cultural landscape, what it’s like to work for one, and how to launch your own.

What is a start-up?

Because of the global success of start-ups, such as Google, Meta, or Apple, many people associate start-up companies with the technology industry. However, start-ups exist across many industries, including health care, real estate, insurance, energy, retail, and more. For example, Brooklinen (a direct-to-consumer bedding company), HelloFresh (a meal kit delivery company), Peloton (an at-home fitness company), and even Coursera were all considered start-ups upon their founding.

One crucial link among all of these companies is that they started with a vision to shift something about their respective industries. That’s why many people refer to start-ups as disruptors.

The founders of HelloFresh could have started a local business delivering meal kits to homes in their area, as many businesses had done before them. Instead, they developed a supply chain that could accommodate delivering meal kits to homes across the country. 

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Why are start-ups important?

Given their role as disruptors, start-ups are important to the business and cultural landscape because they can help societies progress in new directions.

On the business side, start-ups can introduce more efficient practices and methodologies, producing results such as lower production costs or higher output.

Culturally, start-ups can be important to expanding accessibility. With more advanced business practices, companies can expand their market reach, allowing more people to experience the products and services that were once exclusive to smaller groups.

In fact, operating at scale is important for the success of many start-ups. Scaling a business is when a company introduces their products or services to a broader market. Typically, a start-up company will hone the details of their offering in a smaller market, while coming up with a plan to extend their market once the product and systems are in place.

Take Lyft, an on-demand ride share service, for example. Lyft was first launched on college campuses, then expanded to San Francisco, and later introduced their services in cities across the country before moving into a global market. Along the way, Lyft updated their service to better accommodate their customers and workers and navigate legal roadblocks, while keeping their sights on their bottom line.

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Working for a start-up

If you feel motivated and excited by the idea of innovation and progress, and enjoy drawing from various skill sets, then you may like working at a start-up company. Oftentimes, start-ups in the earliest stages will begin operations with a small team of employees in order to focus financial resources on building their product rather than building their workforce.

Because of this prioritization, people who work at start-ups may find themselves performing many different types of responsibilities. For example, rather than having a complete marketing department with separate teams working on social media, brand, and product marketing, they may employ one marketing manager who handles all of those responsibilities.

This may sound like a lot of work—and it certainly can be!—but one benefit of working on a small team at a start-up is that your work can have a greater impact on the product or service offered. Additionally, because start-ups tend to have visions for wide-scale growth, you may find more opportunities for career growth at a start-up than you’ll find at an established company with well-defined roles and processes.

In addition to moving their industry forward, start-ups also tend to bend cultural norms. Start-up companies often offer perks, such as casual dress options, free meals or on-site cafeterias, generous vacation policies, or remote work options. The thought behind these perks is that if the company can foster a welcoming and flexible environment, they can reduce potential limitations to productivity, and thus enable their employees to keep their focus on innovation.

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How to build a start-up

Building a start-up is not a simple task, and about 90 percent of start-up companies will not survive in the long-term [1]. However, for those who are determined and savvy, building a start-up can be a rewarding experience. Here is a simplified roadmap for those interested in the process behind launching a start-up.

1. Have an idea.

Every start-up begins with an idea for change. The idea can come from a place of lack—meaning recognition of a flaw in the current system that’s worth fixing—or from a place of growth—meaning the system is working well, but can work even better. Either way, a start-up company sets out to improve something about its industry.

Understanding both the problem you are solving as well as the solution you are proposing is the first step toward building a start-up. What are you disrupting, and how will you disrupt?

2. Create a business plan.

Once you have your idea, you’ll need to develop a vision that will translate your idea into a prosperous company. Your business plan will outline details such as your company objectives, product or service offerings, target customers, business logistics, marketing strategy, and budget.

Though a business plan starts small, this is an excellent time to consider how you might scale your business in order to become a true disruptor.

3. Secure funding.

There is always some investment to be made when launching a new business. After working through your business plan, you should have a better idea of the upfront costs you’ll need to cover in launching your start-up. You may find that you can work through early stages of development without outside funding or can cover early costs with a small business loan.

Because of their big goals, many start-ups tend to require more capital than a typical small business loan may be able to offer. For this reason, start-up founders often turn to investors to fund their business as they work toward growth. One way to find investors is to turn to incubators.

Start-up incubators are programs that bring together founders, investors, and experienced leaders to collaborate on building successful companies. Examples of popular start-up incubators include Y Combinator, Techstars, 500 Startups, and I/O Ventures.

Others may seek angel investors, or individuals who invest in start-ups using their own capital often in exchange for equity in the company, through networks such as AngelList, Angel Capital Association, or Gust.

4. Start working.

Once your logistics are set and finances are secured, you are ready to start working. You may find it helpful to jump right in, or you may want to do more research on running a business or being a founder. Many start-up founders learn and iterate as they go, seeking guidance as needed.

If you prefer independent research, you may want to subscribe to some start-up newsletters, such as Mattermark, StrictlyVC, First Round Review, or Benedict Evans’ Newsletter, or read some books about start-ups, such as Zero to One by Peter Thiel or The Startup Owner’s Manual by Steve Blank. You also may enjoy listening to founders’ stories on podcasts like NPR’s How I Built This.

Get more tips on how to make the leap to launching a start-up from Ethan Mollick, Associate Professor at the University of Pennsylvania and early-stage entrepreneurship expert:

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I want to talk to you about actually taking the leap to launching your own startup.

Next steps

A founder’s willingness to learn is integral to their start-up’s success. Keep learning about the ins and outs of running your own business with the Entrepreneurship Specialization from the University of Pennsylvania’s Wharton School of Business, or formalize your business education with an advanced business degree.

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Article sources

1. Duet Partners. "Why is premature scaling still the biggest startup killer?, https://www.duetpartners.com/why-is-premature-scaling-still-the-biggest-startup-killer/." Accessed February 11, 2022.

Written by Coursera • Updated on

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