Many people don’t understand what a startup is, especially when compared to online businesses that both utilize technology. Do you know?
The emergence of various types of startups has made the general public familiar with the term. However, do you really know what a startup is? In reality, many people often have difficulty distinguishing between startups and online businesses, especially since both operate using internet technology.
In terms of existence, startups are often associated with entrepreneurs. Through the creativity of the entrepreneur who founded it, a startup can create its own market share. This phenomenon can be seen with the emergence of unicorn startups such as GoJek, Traveloka, Bukalapak, Airbnb, Tokopedia, and others.
Definition of Startup
Initially, startups were also known as fledgling companies. This term was used to refer to companies that were newly established or had been operating for less than 5 years. However, the meaning of the term startup later underwent a contrastive shift with the increasing use of technology by fledgling companies since the 2000s.
The definition of what a startup is became broader, not only encompassing newly established companies. This term is also applied to companies that use technology as their core business. Moreover, the business activities conducted by startup companies can solve problems faced by the community.
Due to their ability to solve problems for the community, startups have a disruptive nature. As a result, startups can create new market shares and even become market leaders. This is achieved by unicorn startups in Indonesia and other countries. The presence of these startups also contributes to the economy and creates new job opportunities that are attractive to the younger generation.
Differences Between Startup and Online Business
When comparing startups to online businesses, they may seem similar because both use internet technology. However, upon closer examination, you can discern the differences between them.
PayPal co-founder Peter Thiel provided a straightforward explanation of what a startup is, making it easy for anyone to differentiate it from online businesses. Thiel revealed that a startup is a company that pushes for vertical innovation efforts, not horizontal innovation.
What is meant by vertical innovation? This type of innovation involves creating technology that does not exist yet. In contrast, horizontal innovation is an effort to introduce technology to areas that are not aware of or using that technology.
From this definition, you can conclude that an online business is not a startup. Moreover, the technology used by online business owners is not new. Instead, online business owners engage in horizontal innovation by utilizing the internet as a means of marketing products.
You can also differentiate between them by understanding the characteristics of startup companies. Some of these characteristics include:
- Innovation: Startups have a primary characteristic of continuous innovation, which is crucial for them to survive and help solve their users’ problems.
- Business Growth: Startup characteristics can also be identified by their growth rate. Startups tend to emphasize growth over profit. In efforts to increase growth, startups often participate in programs organized by investors, such as incubators and accelerators.
- Source of Funding: The effort to achieve rapid growth often raises questions about where startups get the money to run their operations. The answer is that they obtain funding from investors.
- Mobile Platform: Every startup always has a mobile application. This effort is a way for startups to be closer to their users, making it easier for them to address the problems faced by the community.
Also read: 6 Causes of Startup Failure to be Avoided
Until this point, you now know the difference between what a startup is and an online business, right? You could be one of the successful founders of a startup in Indonesia, especially if you have a creative business idea and can create a solid team.
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