Start-ups
476,000
new businesses are started
every month in the US
A start-up is a new business in the early stages of development and operation,
during which an entrepreneur or founding group comes up with an idea for
a product or service, researches it, develops a business plan, raises funds,
and launches with the goal of rapid growth. Registering intellectual property
(IP)—a unique creation, not just an idea—to protect it is an important stage of
the start-up process. Protection includes trademarks, patents, and copyright.
The term ”start-up” became
commonplace during the dot.com
boom of the late 1990s, when
thousands of entrepreneurs with
web-based products and services
found funding, many on the
strength of their intellectual
property alone. Giants Google
and Amazon both started up at
that time. Since then, technology
businesses have become one of the
most talked-about start-up types.
Their value is often based 100
percent on intellectual property.
INTELLECTUAL PROPERTY (IP) vALUE
The early days
Before a company is fully developed,
with a working business model, it
is known as a start-up. The start-up
evolves from an entrepreneur, or
group of entrepreneurs, with an
idea or invention. It can take a
few years to turn the initial concept
or prototype into a viable, profitable
venture, so the start-up founder
tries to attract support and financial
backing to achieve rapid growth.
During this phase, which can take
anything from a few months to several
years, the business changes quickly.
Internal start-ups Start-ups
that originate from inside a large
organization
Patent trolls Companies or
individuals who buy up the patents
of failed start-ups and attempt to
collect licensing fees from potential
infringers of the patent
NEEd TO kNOw
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US_026-027_Start_Up_Overview.indd 26 15/12/2014 12:54
26 27
HOW COMPANIES WORK
Start-ups
40%
the sales growth
achieved by online
start-ups in France,
in 2011–2012
Choose a
start-up type?
With a social conscience?
Primed to grow big?
To fit lifestyle?
See pp.30–31.
Seek help
Join a business
accelerator
Enter a business
incubator
Go it alone
Find an investor
See pp.38–39.
Make a
business plan
Explain how the
business will make money
Describe the unique
aspects of the business
Set out how much money
the business will need and
how much it will make
See pp.32–33.
Consider
the IP
Register IP
Find a name
Buy a domain
Research market
Find funding
Invest savings
Ask friends
and family
Take out a bank loan
Seek venture capital
Try crowdfunding
See pp.34–37.
Prepare to launch
Plan a marketing campaign
Run a test launch and refine
message and offer
See pp.196–197.
Launch
Win? Lose?
Research indicates
that, in most Western
countries, 80–90 percent
of start-ups fail.
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26 27
HOW COMPANIES WORK
Start-ups
40%
the sales growth
achieved by online
start-ups in France,
in 2011–2012
Choose a
start-up type?
With a social conscience?
Primed to grow big?
To fit lifestyle?
See pp.30–31.
Seek help
Join a business
accelerator
Enter a business
incubator
Go it alone
Find an investor
See pp.38–39.
Make a
business plan
Explain how the
business will make money
Describe the unique
aspects of the business
Set out how much money
the business will need and
how much it will make
See pp.32–33.
Consider
the IP
Register IP
Find a name
Buy a domain
Research market
Find funding
Invest savings
Ask friends
and family
Take out a bank loan
Seek venture capital
Try crowdfunding
See pp.34–37.
Prepare to launch
Plan a marketing campaign
Run a test launch and refine
message and offer
See pp.196–197.
Launch
Win? Lose?
Research indicates
that, in most Western
countries, 80–90 percent
of start-ups fail.
T
h
e
b
i
g
i
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a
$
$
US_026-027_Start_Up_Overview.indd 27 15/12/2014 12:54
How it works
The idea is just the start. Next
comes the process of expanding
the concept into a viable business.
Specialized help may be needed in
some areas—hiring a website and
logo designer, for example, and an
accountant to advise on the best
structure and financial setup.
What the business and product
or service are called can make or
break the start-up, so it is worth
spending some time doing online
research to make sure no one
else is using an intended name,
especially in a negative context.
Location is another consideration
with significant cost implications.
It may be possible to create a virtual
office and work from home. Finding
premises is an extra stage, but the
goal at start-up is to keep costs low.
Start-ups from
concept to launch
Lean start-up Method of
learning fast and discarding what
does not work to keep start-up
costs down
Start-up pivot Quickly changing
direction or correcting mistakes
based on customer feedback or
technology changes
NEED TO KNOW
A new business can be described as a start-up in the early phases of
its launch, when an entrepreneur comes up with the idea for a product
or service, and develops the concept into something that will sell.
Come up with a
good idea
Develop a product, or
an idea for a product.
Register IP
For an invention or
innovation, register
your intellectual
property (IP).
Create a look
Design a logo and
visual identity for
the business.
Make a website
Build a website.
Research search
engine optimization
(SEO) words to use on
it (see pp.230–231).
START
Decide on a name
Check to determine whether your
proposed name is available; check
that the domain name is available;
search online for competitors with
similar names.
Set up an online
presence
Register the domain
name and set up
web hosting.
@
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28 29
how companies work
Start-ups
START-UP STRUCTURE
75%
of all US
start-ups
failed between
2004 and 2010
Low cost, easy to set up,
minimum of financial
reporting
More input, more potential
to raise funding
Low risk of personal liability;
tax benefits; dividends can
supplement wages
Personal liability of partners is
limited to the amount they
invest in the business
May be seen to lack credibility;
challenge to raise capital
Harder to dissolve in case of
failure; partners liable for debts
More financial reporting
necessary; more paperwork
Must file annual accounts;
can be dissolved once a
partner leaves
Research market
Study your proposed
target market and
potential competitors,
and evaluate the
viability of the idea.
Devise a plan
Draw up a plan (see
pp.32–33), including
your goals, mission
statement, and key
financial information.
Obtain backing
funds
Consider a business
incubator if the
business requires
large-scale support.
Set up finances
Include an accounting
and cash-flow system,
sales tax if applicable,
and bank account.
Start marketing
Plan a marketing
campaign. Run a
test and make any
refinements to the
message or strategy.
LaUnch
Decide structure
Choose a business
structure that suits
your initial needs, but
also allows flexibility
for growth.
Pros Cons
Sole
proprietor-
ship
Partnership
Limited
company
Limited
liability
partnership
$
$
Business
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28 29
how companies work
Start-ups
START-UP STRUCTURE
75%
of all US
start-ups
failed between
2004 and 2010
Low cost, easy to set up,
minimum of financial
reporting
More input, more potential
to raise funding
Low risk of personal liability;
tax benefits; dividends can
supplement wages
Personal liability of partners is
limited to the amount they
invest in the business
May be seen to lack credibility;
challenge to raise capital
Harder to dissolve in case of
failure; partners liable for debts
More financial reporting
necessary; more paperwork
Must file annual accounts;
can be dissolved once a
partner leaves
Research market
Study your proposed
target market and
potential competitors,
and evaluate the
viability of the idea.
Devise a plan
Draw up a plan (see
pp.32–33), including
your goals, mission
statement, and key
financial information.
Obtain backing
funds
Consider a business
incubator if the
business requires
large-scale support.
Set up finances
Include an accounting
and cash-flow system,
sales tax if applicable,
and bank account.
Start marketing
Plan a marketing
campaign. Run a
test and make any
refinements to the
message or strategy.
LaUnch
Decide structure
Choose a business
structure that suits
your initial needs, but
also allows flexibility
for growth.
Pros Cons
Sole
proprietor-
ship
Partnership
Limited
company
Limited
liability
partnership
$
$
Business
US_028-029_Startups_From_Concept_REV.indd 29 21/11/2014 16:37
How it works
Not all start-ups fit the same mold.
Although they often follow a similar
process in their initial evolution,
they are as varied in type as the
personalities behind them. Start-
ups can broadly be divided into
those that are aimed from the
outset to be large ventures within
a corporate environment, and
those intended to work on a more
personal scale to suit the lives
and passions of individuals.
Entrepreneurs go into businesses for many reasons. Some start-up
decisions are based on personal ethos and conviction, while others
are founded firmly on the desire to make money.
Types of start-up
173%
the projected
revenue increase
over three years
for mobile gaming
start-ups
Enterprise portal Dedicated
website providing content
for staff, usually intended for
larger companies
Micropreneur Entrepreneur
who keeps their business small
so they can control and manage
it alone
Burn rate How fast the start-up’s
initial cash balance is going down,
month by month
NEED TO KNOW
Motivation
Making a difference
Example
Ex-athlete starts
fitness coaching
business
Example
Malaria blood-test kit
for smartphone
Type of funding
Self, friends,
peers, bank loan
Type of funding
Community, charity,
government, donation
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Motivation
Working is a passion
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30 31
how companies work
Start-ups
Motivation
Readiness to grow
Motivation
Innovating
Motivation
Feeding the family
Motivation
Intent to sell the business
on from the beginning
Example
Phone app
developer
Example
PC manufacturer starts
a separate business
providing cloud
data storage
Example
Small-town
grocery store
Example
Biotech
laboratory
Type of funding
Crowdfunding,
angel funding
Type of funding
Internal company
funding
Type of funding
Self, family,
bank loan
Type of funding
Outside
investment
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