There’s a lot of startup lingo being thrown around – incubators, accelerators, VCs and pivots might be household terms to those in the startup community, but they somewhat baffle the newcomers, or the startupless folk who ventured to watch HBO’s show Silicon Valley.
Even though this is supposed to serve as a glossary of sorts, I am going to go wild and not organise it alphabetically. I’m going to try a bit of common sense and walking in the shoes of someone who’s never tried out the startup waters and go from there.
So, what is a startup, anyways?
A startup company is a company in the early stages of operations, and although there is some debate on what makes a startup, their main characteristic is scalability.
Google is going to tell you that scalability is “the ability of a system, network, or process to handle a growing amount of work in a capable manner or its ability to be enlarged to accommodate that growth”.
What it basically means in terms of startups is great potential for growth, but let’s work that out through an example. Imagine you have a barber shop. One barber has one chair and can service ten customers per day. If want to shave 20 people a day, you’ll need another barber and another chair, and so on. This is not a startup, no matter how young this venture is or how popular your shop becomes.
Lets say you are a developer and you launch your app. First you get ten users. If a hundred people want to use your app, you don’t need ten more developers working on it – or if a thousand or a million people decide to use it. What you get out of your app is growing exponentially in relation to what you put into it. That’s a startup.
Note that this is a gross oversimplification and that you’ll put blood, sweat and tears into your startup to make it in the world – consider this a very rough sketch for educational purposes.
Now that you know what a startup, you need some money to work on it. One of the options is bootstrapping, which means you are using your own money to finance your product. The usual scenario is that you outsource your services or skills to someone else – you work on someone else’s product, for example – and you use the income to support you while you work on your own product. This is a perfectly legitimate, if not the easiest, way to start working on something of your own and works well for many startups.
There are, however, alternatives. Depending on the stage of your company (Is it just an idea? Do you have a prototype? Is your business already running?) you can attempt to join either an incubator or an accelerator.
As the name suggests, incubators help you ”incubate” your idea, create a business model and start a company. The biggest advantages of both incubators and accelerators are mentors – experienced people from the industry you are trying to enter who can give you invaluable feedback, networking opportunities and a chance to present your self to investors when the time comes.
As opposed to incubators, accelerators are more suitable for startups in a more advanced stage, because their job is to “accelerate” your business and growth – so, you’re pretty much expected to have actually started your business and you’re ready to take it to the next level. In addition to mentoring, networking opportunities and everything else that incubators provide, accelerators offer a seed investment that is supposed to fuel your growth.
Note that applications are highly competitive.
To get anywhere, however, you’ll need to pitch – this means presenting your endeavour in a concise an informative manner. This is best done by creating a “pitch deck” with all the relevant info. the usual amount of time you have is 3 minutes (yes, this is enough), but sometimes you’ll need to show your craft with an “elevator pitch”, which is basically doing the whole presentation in a (very short) elevator ride, meaning about 90 seconds.
Lets stop here, shall we, and get into the pivots, VCs and equities next time.