“A start-up describes a recently launched company”. But is every recently launched company also a start-up? Many people associate start-ups with the clichéd image of potential founders developing their ideas during night shifts in inconspicuous garages to subsequently bring them to market. But even if this image is somewhat clichéd, there is a lot of truth in it – because at the beginning of a successful start-up there is almost always an innovative idea and few financial resources. Start-ups break up existing structures and replace them with their innovation within a few years. Most start-up founders have been working in an industry or dealing with a specific topic for a long time before they formulate a business idea that is suitable for a start-up. It often has to deal with a young or non-existent market and must first find a functioning and scalable business model. Once they have found and established this, they are generally no longer considered a startup.

What is a start-up?

The word start-up is a term for young companies that are in the start-up phase with an innovative business idea. There are many characteristics with which start-ups stand out from common companies. One is the characteristic degree of innovation. An idea is pursued that, in the best case, has an above-average potential to grow (scale). Secondly, it is also the team culture and mindset within the start-up. This includes energetic leadership, strong team cohesion, the ability to act quickly, and constant learning. Another characteristic of start-ups is low seed capital. Financing is usually provided by start-up grants and investors rather than traditional loans. But despite all these characteristics, start-ups are highly important for the economy. The German government declares start-ups and entrepreneurs as important players in the national economy and the global market, as they contribute to the stability of the democratic world order and entrepreneurial freedom. They realize innovative ideas, have positive effects on the labor market, and create jobs. In this way, founders of startups promote progress, growth, and competitiveness, thus preventing “power concentration” of big players ,through heterogeneity and diversity.

What is a good idea for a start-up?

Many people dream of being their boss and starting their own business. But many questions occupy most. How should I become self-employed and start my own business? Where can I find inspiration and methods? Are there ideas that will make a positive difference? Is the idea sufficient? Start-up ideas exist in various fields of activity. Maybe you stumble upon a problem that can be solved with your own and new business idea and even represents a real gap in the market. Often you are the best source of innovation yourself. What keeps you busy? Have you ever had a situation where you realized you could improve something? Recognizing an opportunity is crucial. After all, in addition to brainstorming, the viability of the idea is also relevant. Modern technology and sustainability offer many opportunities for redesign and environmentally conscious change. That is why most startups are encountered in the technology sector. Many young founders can be found in the development of medical technology, artificial intelligence, and sustainable food ideas as well as innovations in the field of biotechnology. Digitalization allows creative founders to realize novel and innovative concepts.

How can you successfully found a start-up?

As a founder, certain qualities are necessary to be able to successfully implement the business ideas. Starting with a high willingness to perform, a healthy degree of risk-taking, a high level of resilience, and the ability to motivate people. One should know one’s strengths and weaknesses right from the start and be willing to work on them. Also, one should be sufficiently equipped professionally to be able to survive in their market. Once a business idea is in place, the next step should be the development of a scalable business model and detailed preparation of a business plan. The next step is to find suitable financing (more on this later). A business plan guides someone on their own and reasonably estimates the risks and opportunities of the start-up. Besides the business idea and the business plan, a motivated team is also very important. The founding team usually covers three areas: Development, Marketing, and Sales. One person can’t manage all these areas alone, which means you won’t get far as a lone fighter.  The more people with different characters, different backgrounds, and strengths are in the team, the more extensive are the abilities to make the start-up successful. There are hardly any investors who are not interested in knowing who is behind a start-up idea. For investors, a team that works well together represents one of the key reasons to invest in an idea. The composition of personalities and the skills of the team are an initial predictive level for future startup success. Therefore, a team that works together and trusts each other with a flat hierarchy is essential for the success of a start-up.

How long does the start-up phase last?

For start-ups, it usually takes an average of one year from the founding of the company to market launch, from research and development to the establishment of production and sales. Until a start-up has successfully established itself as a company in the market, it goes through various development phases and this can take up to four to seven years.

What are the development phases of a start-up?

Startups can be divided into four development phases: 

Seed phase: With the help of the creation of a business idea and business plan, it is assessed how the development of the business idea is feasible, whether the product is viable in the market and how much capital is needed. 

Start-up phase: This is the phase in which the company is founded and includes the completion of a market-ready product and the subsequent public presentation (rollout). The focus here is on the design of sales and production options and the implementation of marketing campaigns.

Emerging growth: The focus here is on rapid market penetration through targeted sales development.

Expansion: Once the business model has been successfully established in the market, the next steps of expansion can be taken. These include, for example, further development of the products or services and expansion of the sales systems.

How can you finance a start-up?

In addition to the idea, business model, business plan, and founding team, the successful establishment of a start-up also requires sufficient financing.

Since in most cases only a small amount of start-up capital is available to implement the business idea, many start-ups aim to expand their business at an early stage. For financing, a classic loan via banks is often difficult to organize due to the high risks involved. Therefore, innovative forms of financing such as venture capital (venture angels) and scholarships are more suitable. Venture capital refers to investors who support start-ups using their funding, network, and know-how and are interested in the rapid growth of the company. Family and friends can also invest in a start-up as private investors. There are also subsidies from the federal government or the European Union, these are loans with good conditions that must be repaid in part or in full. There are also subsidies that you can keep completely as a founder – for example, the start-up subsidy and the EXIST start-up grant. In the start-up scene, young companies can also participate in countless regional and national start-up competitions, whose prizes also serve as short-term interim financing.

Founding a start-up is exciting and challenging at the same time. With the right idea, solid planning, a well-functioning team, and a good funding program, nothing stands in the way of success.