A startup is a newly created organization, a temporary structure, a company with a short operating history that develops new products or services, searches for a reproducible, profitable, cost-effective and scalable business model, develops or explores promising markets in conditions of extreme uncertainty. It is also important to understand that startups often take advantage of technological progress rather than push it forward. A startup may not be a legal entity, it is created for the implementation of a specific idea, financing is largely carried out at the expense of external investors.

The characteristic features of a startup that distinguish it from newly created and small enterprises include:

• Lack of funding (due to the founders’ own capital investments, such projects rarely cover at least 5% of the funds required for the implementation of the project, such projects cannot develop without attracting external funding);
• Lack of direct competitors/Innovativeness/Creation of something new (startups include projects that create a product or service that can create a new or occupy a free niche in the market, which in turn implies the almost complete absence of marketing and other information, on the basis of which it is possible to draw conclusions about the degree of success of the project, the creation of an analogue of an existing enterprise, the re-implementation / copying of someone else’s idea is not a start-up);
• Big risks;
• Temporary structure/lack of legal entity;
• Reproducibility and scalability of the business model;
• Flexibility (both structures and strategies, methods, as well as areas of activity).

This format of starting a business has become quite popular in Russia in relatively recent times. This is due to the following factors:

• Simplicity (a startup, in fact, is an “attempt” of a business). This format of starting a business activity does not oblige to anything, it is carried out at the expense of investors, which are in the nature of subsidies, i.e. non-refundable in case;
• Market economy
• Very high profitability in case of successful project implementation (this factor attracts both entrepreneurs and investors to this format of doing business);
• The success of this business format abroad

Startups have a number of advantages and disadvantages.

Advantages:

• High profitability;
• Mobility;
• Monopoly status, no direct competitors.

Disadvantages:

• High risks;
• Small “sizes”;
• Funding problems.

The main stages (stages of development) of a startup include the following:

1. At the seed stage, an idea is formed and startup forecasts are calculated. Startup stage – Pre-seed. At this stage, there is an idea and a clear understanding of what exactly buyers need, but there is still no clear idea of ​​​​how this idea is best implemented technically and how it should be promoted so that it brings money, or is, but only in the most general form;
2. At the launch stage, a startup “comes out” and begins to spend resources – until the next stage, it will be unprofitable. Startup stage – Seed: seed stage. At this stage, the market is studied, a startup plan is drawn up, a technical task is drawn up and executed, a prototype is created and tested, the search for the first investors and preparations for the launch of the project are underway. Also at this stage, a prototype, alpha version of the product, closed, and subsequently open beta versions of the product are created;
3. Not all startups reach the stage of growth, but those who “survive” receive significant profits. A startup occupies a stable position in the market and is confidently moving towards conquering a niche that was outlined at the stage of writing a business plan;
4. The expansion stage (the second peak of popularity) is the active expansion of the project. The startup has already met or is close to fulfilling the business plan in the primary target market, and is starting to expand the boundaries by conquering other markets. The company can expand its business either alone or through the purchase of other enterprises;
5. Exit stage – that is, a breakthrough to the “big market”. An exit primarily refers to the exit from the business (partially or completely) of business angels and venture investors who previously participated in the financing of a startup. The exit can occur through the sale of the company to strategic investors, through the placement of the company’s shares on the stock exchange (IPO) and through a private placement (sale of the company’s shares to private equity funds). Venture capital funds finance promising startups that, as a rule, always show rapid growth at the initial stage of growth, and by the exit stage, startup growth slows down compared to previous stages, although the business itself becomes more stable. Also, one of the options for “exit” and startups and investors may be the termination of business and the bankruptcy of the enterprise.

It is not necessary that every successful startup goes through all of the above stages, it happens that it simply “jumps” some of them.

A startup “consists” of three components: idea + team + funding. The idea is what a startup is created for, the team is implemented by whom, financing is due to what.

• Idea. The main resource for creating a new startup is a good idea. The main factor in the success of an idea is its relevance (the degree of necessity for the consumer), because the idea may be unusual and new, but it will not be useful.
• Command. The team is perhaps the most important component of a startup. If it is enough to subject the idea of ​​the project to a formal examination, then investors pay great attention to the study of the team, as well as the founder of the project to the selection of a team for him. Often, a startup team is made up of friends, like-minded people who find this project attractive and have the necessary skills and competencies. It is important that one team member effectively complements the other, that is, has the necessary qualities and skills that the partner does not have. For the successful implementation of the project, the experience of successful implementation of projects, management of a company or projects in the past is not required, but, as practice shows, such experience increases the chances of success. Project participants work in most cases for an idea, a conditional salary and possible profit in the future if successful,
• Financing. A startup is a risky project that can quickly recoup the funds invested in it, or it can fail. A large number of startups do not justify the hopes placed on them and burn out. There are much fewer successful ones. Money for the development of a startup is often given by investors in exchange for the right to own part of the company.

Any investor knows that it is the “dark horses” that promise the greatest profits. Therefore, financing of startups in Russia has long been put on stream.

Today, so-called business angels and venture funds are investing in startups. Venture entrepreneurs manage the shares of mutual funds that they invest in young, but promising undertakings. Business angels are private investors who independently determine the object and amount of investment. To these two startup investors, you can conditionally add friends and relatives. And no matter how strange it may seem to someone, it is this category that ranks second in Russia in terms of investments in startups, and third at the world level.

Startup funding falls into two main categories:

• Postponed to stability;
• “Fan”.

The first type of investment is investment with a predictable return. Startup financing will be carried out at a certain stage of the project, if the project lives up to it. Startup owners reach the agreed level and receive funding.

The second type of investment – fan – is different in that funding is issued in the early stages of the project. The investor finances projects that can pay back the investment dozens of times.

One of the most productive methods of finding investors for your project is “networking” – participation in industry forums and conferences, in start-up competitions and venture investment events, in which a large number of companies wishing to receive financing, as well as potential investors, take part.

Publishing ads on relevant forums and websites can help attract an investor. There are also startup exchanges and organizations that fund startups. In Russia, there are several forms of support for start-ups, which include public and private funds, business incubators and technology parks, venture capital companies and private investors.

The main problem for startups is the lack of funding. without it, the project will not be able to develop in principle. A loan is the easiest, but at the same time one of the most expensive ways to finance a startup. Loan conditions, such as: volume, term, interest rate, etc., are determined by the bank, based on the credit policy established in this particular bank. Such financing is provided only to companies that have confirmed their solvency, as well as providing the necessary collateral, the value of which is greater than the loan. If the project fails, the company repays the loan at its own expense. Therefore, financing of start-ups is possible only at the expense of own funds, which in most cases are simply absent, or by attracting investments.

Attracting an investor or investment in the stock market to a project requires open reporting, control over financial flows, and business transparency from the project. The higher the investment attractiveness of the enterprise, the more likely it is to receive investments.

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