What is Startup? The following is the definition and history

What is Startup?

A startup is a start-up company that is in the development stage. Good development in product, service, market share, business model, etc.

A startup is like a company that is still a teenager, there are still many changes and still in the stage of maturity.

If the startup is mature, it can be considered a real company.

Well, to be more clear, let’s borrow the definition of startup according to Neil Blumenthal, a startup is a company designed to solve problems where the solutions are unlimited and success is not guaranteed.

Sound difficult? Let’s dissect the above understanding slowly…

1. Designed to Solve Problems

In contrast to ordinary companies that issue products according to market demand. What startups produce, whether in the form of goods or services, highlight the problems that exist in the market.

This makes startup products a solution to a problem that many people feel.

That’s why startups are known as problem solvers and have the characteristic of solving problems using technology .

For example, for transportation, you might prefer to use one of the online motorcycle taxi services in Indonesia.

Or when you want to buy goods, you might first search in one of the e-commerce sites, such as Shopee, Tokopedia, BliBli, and so on.

Not only that, there are still many digital products that are useful for you, such as news media, ease of online transactions, communication, etc.

Such digital service or product providers are usually startups.

startup-developed technology illustration

Photo by Yura Fresh – Unsplash

Hmm, if you look at all the examples above, it looks like a startup is like an online-based business, right?

Then, is a startup the same as a digital or technology company?

Certainly not.

Not all startups are tech companies. The reason is because startups use technology to run their business .

Not only developing, technology plays a very important role for startups to solve problems according to their goals.

2. The Solution is Broad

The solutions brought by startups do not just solve one main problem. It also provides solutions to other specific problems related to the main problem.

For example, e-commerce in Indonesia is one proof of solving the problem of limited offline buying and selling products.

The solution is to bring together sellers and buyers in online stalls.

But the solution doesn’t stop there. To survive, every e-commerce always provides other solutions to consumers.

For example, such as free shipping, user friendly display, data security, and so on.

Although not related to the main problem, these things are very important and have an effect on business continuity.

3. Success Can’t Be Guaranteed

Lastly, startups are high-risk businesses. And indeed not a few startups that eventually collapse due to various things, such as the results of research from CB Insights below.

startup failure factors

From the infographic above, we can find out what are the factors that cause startup failure.

One of them is a product or service that is less solution for the target market.

Wow, that’s very much related to the previous discussion, isn’t it?

But that doesn’t mean startups can’t be successful. There are so many startups that can compete and even get admirable titles, such as unicorns, decacorns, and so on.

So, don’t be afraid to start a startup business, OK!

Also read: 7 Ways to Start a Startup Business for Beginners.

Startup Journey History: Past, Present, and Later

Although startups are fairly new types of businesses, their presence is not without history. There is an interesting story behind the fast-paced startup industry today.

Dot-com bubble

The dot-com bubble was a time when internet-based companies attracted investors so much that they had high stock values.

Occurred in 1998-2000 in the United States, when the internet was at its peak of fame and was increasingly used by various groups.

At that time, the internet was considered an extraordinary new invention and had a bright future.

From there, many new companies emerged and made the internet as the main driver, called startups.

Usually, to better show the “startup side”, this company adds an e prefix or a dot-com suffix.

startup history during the dot-com bubble or the dot-com bubble

Well, this triggers a very tight competition.

Every startup has not attempted to sell its products or services. Rather, it is more focused on being known by many people first.

For example, by placing advertisements, providing promos or discounts, free services, and all unmitigated marketing processes.

The hope is that the more familiar a startup is, the more customers it will have in the future.

But apparently, this marketing competition has caused many startups to be unable to manage their finances properly, not to make a profit, and eventually to die.

The high competition for startups at that time and the bankruptcy of many startups were likened to the bursting of the dot-com bubble .

New Face of Startup

Let bygones be bygones…

Now, these dark times are being paid off with the rapid growth of startups. Starting in the United States, then spread to other countries.

In Indonesia itself, the growth of startups is growing rapidly and is accompanied by a large number of digital users.

Startups currently exist in almost every industry, such as clothing, food, media, education, health, finance, transportation and so on.

According to MIKTI (Indonesia Digital Creative Industry Society) in Mapping & Database Startup Indonesia 2018 , there are three areas that are the most crowded in Indonesian startups, namely:

the most popular startup field in Indonesia
  • Economics and trade : marked by the massive emergence of e-commerce startups.
  • The field of fintech (financial technology) : exists because of the use of mobile-based applications that make it easier for users.
  • Game or game field: startups in this field are popular because making games is considered easier and has a broad target market.

In addition to the three fields above, there are still many industries that are controlled by startups. This development is supported by the 1000 Digital Startup Program, and other startup incubators.

Due to the rapid increase in startups, Indonesia has also been helped by this digital economy.

As research from INDEF (Institute for Development of Economics and Finance) said that the digital economy contributed 5.5% of Indonesia’s GDP in 2018 and managed to absorb 5.4 million workers.

The Future of Startups

It seems that it is true that currently startups are businesses that promise a bright future. With very high internet usage, Indonesia has become a very fertile startup stall.

Imagine, Indonesia can have one decacorn startup and four unicorn startups.

Of course, it really helps the internet-based economy in Indonesia, right?

In line with this, Google’s report in e-Conomy SEA 2019 shows the economic value of the internet in Indonesia in 2019 has crossed 40 billion dollars.

It is estimated that this value will pass the 130 billion dollar mark by 2025.

5+ Reasons Why It’s Called a Startup?

There are several ways to tell what a startup is and what isn’t.

This is because startups have their own characteristics, as follows.

1. Innovative and disruptive

The main characteristic of a startup is innovative and disruptive. Innovative means an update or new creation.

Meanwhile, disruptive is changing a pre-existing system.

The product or service offered is mediocre? It’s not really a startup! Startups must be able to provide solutions that are “different” from the previous ones, in short, anti-mainstream .

So that the innovations created are in line with market needs, startups must always look from the consumer’s point of view first.

So the idea that is run is not in vain. This point is closely related to the concept of customer value.

Also read: What is a Customer Journey? How to Apply It to Your Business?

For example, one of the transportation startups in Indonesia, Gojek.

In the past, when we wanted to use a motorcycle taxi, we had to look for ourselves and bargain the price until we got into a fist fight.

Now we can easily find motorcycle taxis online, complete with prices that are adjusted to the distance traveled.

From the example above, it can be seen that Gojek brings disruptive innovations or can change the existing system.

The old conventional method has been replaced by a new system brought in by startups.

2. Have a Website and Go Mobile

When companies or shops flock to go online, it’s not for startups.

Basically, startups use technology to grow their business. That’s why since the beginning the startup has been in the online realm.

For a startup, having a website as an online base is mandatory. The use of the website is not just a formality, but plays a lot of things.

Starting from branding, customer education, promotional media, even a place to sell products or services.

Also read: Have a Startup? Only Use .TECH Domains.

market share opportunities go online in Indonesia

Not only online, but startups usually have read about the opportunity to go mobile. Go mobile is a very large field for startups to attract consumers.

The research above shows that by 2025, as many as 80% of Indonesia’s population is already using mobile-based internet. With such a large market, it is natural for startups to have their own mobile applications.

3. There are investors

Investors play an important role in startup growth. Investors are needed by startups for several things, such as initial capital injections, development, and expansion.

Because usually startups are founded with amazing ideas, but not infrequently those who have limited funds.

However, investors do not give money for free. Surely there is a return that investors want.

Then, what is the type of startup investment that you must know? Here are some of them:

  • Ownership shares . It’s like buying shares. Investors provide an amount of money in exchange for a few percent of shares, so investors can also make decisions when managing startups.
  • Profit sharing or profit sharing. Investors have the right to receive profits according to their investments, and must be prepared to accept losses as well.
  • Returns according to the amount invested. Startups must be able to return money and interest from investors within a certain period of time.

Investors are usually more daring to fund startups that have the opportunity to grow, even though in the early days of startups the possibility of losing is very high.

But all will be paid off with the rapid development of startups and has many users.

4. Undergo an Incubator or Accelerator Program

What is a startup incubator ? So, this program aims to help the development of startups in the early stages. This program usually consists of training, mentoring, to funding.

By following an incubator, startups can learn how to manage and develop their business models. Because there are not a few startup cases that have brilliant ideas, but are weak in terms of management.

This guidance is carried out until the startup business is considered stable and ready to be managed independently.

Meanwhile, an accelerator is a program to accelerate the development of a startup. Startups that follow accelerators usually already have a mature idea and are ready to run.

Accelerated by connecting startups and professional mentors. Usually consists of financiers, investors, business experts, or senior startup founders.

Accelerators are considered more exclusive than incubators with a more stringent selection level.

Business ideas brought by startups will be processed and matured. In addition, it will be built in less time.

Also Read: Getting to Know Lean Startups – Methods Online Businesses Must Learn

In addition to developing a business, participating in these programs is also used by startup founders to expand connections. Especially to investors and startup communities in Indonesia.

5. High Flexibility

Startup innovation is not only at the beginning of its establishment, but also must be sustainable in order to compete with competitors.

Startups are always developing, innovating, and dynamic according to market needs. That’s why startups are famous for their high flexibility.

This really distinguishes startups from mainstream companies that are rigid, have convoluted bureaucracy and are less able to adapt to change.

flexibility of working online

Photo by Chris Montgomery – Unsplash

Because they are customer-oriented, startups often “catch the ball” by adjusting their internal workings.

For example, a minimalist organizational structure, operational systems as needed, always updating market research, remote work systems, multitasking and fast-paced decision making.

Even to further improve its performance, startups will not hesitate to rebrand if needed.

Where this is very rarely done by companies in general.

6. Fast Business Growth

One of the reasons why it is called a startup is to have a fast business development.

This is because the previous points, namely, because of innovation, going mobile, utilizing technology, being easy to adapt, to having investors, make startups able to develop rapidly.

This development aims to turn startups into technology-based companies. If likened to a startup, it is the “teenage” of a company.

When a startup can monopolize an industry, it can be called a company.

Like, Google. Starting as an algorithm project to build a search engine, Google has successfully turned from a startup into a technology company.

With the help of investors, Google penetrated into other sectors of the internet industry. Like, issuing email services with Gmail, advertising with Google Adwords, AdSense, and so on.

In addition, startups can also be distinguished based on their growth phase. Want to know what is the difference between each phase of startup growth? Let’s see one by one:

  • Cockroach or cockroaches , startups that are usually newly released, have a high survival rate and are very active in seeking investors or funding.
  • Ponies , the startup funding is already worth $10 million and is still working to scale it up.
  • Centaurs , symbolized as Greek mythological creatures (man half horse), have a valuation of around 100 million dollars, and are considered to have sustainable products .
  • Unicorn , predicate startup that has a valuation of over 1 billion dollars! In Indonesia, several startups have won this title, for example Tokopedia, Traveloka, and Bukalapak.
  • Decacorn , aimed at startups with a valuation level of up to 10 billion dollars. At this level, startups are very likely to expand to other countries and begin to dominate the market.
  • Hectocorn , a fully- fledged startup. Usually the valuation level is already over 100 billion dollars. This company has successfully monopolized the industry at the international level, such as Google, Apple, Microsoft, etc.

More fully, a startup can be said to have “graduated” and become a company when it meets the following requirements:

  • Startup age is more than 3 years.
  • There are acquisitions from larger companies.
  • Has many offices.
  • Has more than 80 employees and a board of directors of more than 5 people.
  • The value of income is more than 20 billion dollars per year.
  • Or if there are company owners who sell their private shares.

Also read: 7+ Growth Hacking Tactics to Grow Startups

What are some examples of startups in Indonesia?

You must be familiar with names like Grab, Bukalapak, and Zenius? Naturally, because there are already many popular startups in Indonesia.

Uniquely, the startups that are developing in Indonesia are very varied in their fields. From trade to health and agriculture!

Well, here are some examples of startups from Indonesia:

  1. Gojek – Who doesn’t know Gojek? This startup engaged in transportation has been around since 2010 and has become one of the pioneers of online motorcycle taxi applications in Indonesia.
  2. Tokopedia – This startup is one of the best online store platforms in Indonesia. In addition, they also recently merged with Gojek and formed GoTo.
  3. Traveloka – This startup is arguably the strongest player in the online travel industry in Indonesia. The services they offer also vary. Starting from booking plane tickets to booking tickets for tourist attractions.
  4. Ruangguru – Do you often see its advertisements on TV? Understandably, currently Ruangguru has become the most dominant online education startup in Indonesia.
  5. HaloDoc – HaloDoc’s name is already attached to the online health application. No wonder, because HaloDoc does offer a variety of interesting services. For example, a direct consultation with a doctor.
  6. Seeds – If you like investing, surely you are no stranger to Seeds. This startup can help its users to invest in mutual funds easily and practically.
  7. TaniHub – Do you want to buy fresh vegetables? This one startup can help you. Because TaniHub sells a variety of fresh food ingredients that come from farmers in Indonesia.

Also read: 7 Tips to Build Your Startup, Simple and Effective

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