The word “startup” has become somewhat of a trendy word in Nigeria these past few years. As a matter of fact, asking the average person on the street what he or she thinks a startup is, they begin to paint a picture of nerdy looking young men with wired rimmed glasses on, all hunched over their individual computer screens writing codes. These are the ones that have a faint idea of what it, at the very least entails. Some others would describe a small business which boasts of an interactive website for online customers, say for example a holiday inn tucked in the middle of nowhere with a website where clients can easily book a room in advance.
This does not necessarily come as a surprise because even industry professionals are yet to come up with a uniform and well outlined definition of a startup. However there are basic characteristics that startups possess which differentiate them from every other money making venture out there. To properly understand what start-ups are, we would need to look at how they are birthed, how they operate and how they remain sustainable.
A percentage of the tech community believes that for a business to qualify as a startup, it must be tech focused or tech driven but some others disagree. Looking at this from a logical angle, Uber, Konga, Easytaxi , Paypal and Dealdey are companies that would not have existed without some sort of technological input.
Another thing these five companies have in common is the possibility of becoming a full grown public company. Your typical supermarket or mall would have to have various branches in all over the place to be able to gain the following that let’s say Jumia has. What this tells us is that startups think differently about growth, expansion and followership.
The second thing these companies have in common is the ability to identify a particular niche in the market and tailor their products and services to satisfy this niche. They come up with ideas that disrupt the normal way business is conducted, coming up with fresh and innovative ways of getting things done. These ideas that are birthed as a result of critical thinking, have the capability of changing the way the marketplace is viewed. One thing to note is that these systems usually run on real time. This means at any time of day, you can access these platforms and get the services you require. This brings us to the issue of scalability.
A business is not a startup if its mode of operation is not scalable. The platform should be able to serve 10 people and a million people without any hitch in operational processes. A million people using the platform all at once should not affect the cost of operations if it were just one person accessing it. They should be able to handle increased workload without any visible change in performance. This is the major difference between Paypal and your average bank.
Another factor that is attributed to startups is the risk of uncertainty. These companies churn out ideas that have never been tried before; they are in a constant state of uncertainty because they do not know how long they would exist for. This means that a company could have been in existence for seven years and still be labeled a startup.
In summary, Eric Ries (author of Entrepreneur-in-residence at Harvard Business School, Ries and an entrepreneur operating out of Silicon Valley) describes a startup as
“a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”