Start-up

Definition

A start-up or start-up company is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets.

Evolution of a start-up company

Start-up companies can come in all forms, including those that are simply lifestyle companies, but the phrase "start-up 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 (ROI). Successful start-ups are typically more scalable than an established businesses, in the sense that they can potentially grow rapidly with limited investment of capital, labor or land.

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

A company may cease to be a start-up 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. Companies may also fail and cease to operate altogether.