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A company operating within its first stage of investing is known as a startup. While startups may give the impression that the company must be new, that is not always the case.
Many companies can have this designation after nearly three years of existence. Typically, a company exits the startup status after a period between 3 to 5 years or after successful funding rounds where capital is acquired.
Startups tend to derive out of the belief that there is a demand for a service or product which is created by at least one or more entrepreneurs.
These seek capital as a means to bypass a limited availability of capital and combat high costs.
This is why startups seek funding from funding rounds, crowdfunding, venture capitalists, financial institutions, or other sources.
What Makes Startups Successful?
Given the fact that most startups fail, the first three years of a startup are critical which is why startup founders require capital for talent acquisition, creating effective business models and plans.
In parallel it is important to provide proof-of-concept for the long-term through an established user base and consistent revenue streams.
Many startups use seed funding, which occurs during the first stage of funding rounds, where fundraised capital is used to conduct market research and product or service development.
Sometimes, startups go through an acquisition process, where they merge larger companies competing in a similar industry.
Companies that generate less than $20 million annually, possess less than 80 employees, and are primarily controlled by the founding entrepreneur(s) are generally classified as startups.
Today, some of the world’s most successful companies started as startups, such as Facebook, Uber, and SpaceX to name a few.