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INTRODUCTION

The word “startup” has become a buzzword in contemporary policies and public debate. Promoting entrepreneurship in the form of startups is a policy activity being given high priority all over the world.

DEFINITION

Carter et al (1996),a "start-up" is a newly born company, without previous history of operations.

Cho and McLean (2009) Temporary organizations that create innovative products and/or services using high technology, but this type of companies are also known to be inserted in uncertain and risky scenarios.

 Krejci et al (2015), a startup is a new and temporary company that has a business model based on innovation and technology. In addition, these types of companies have a potential for rapid growth and scalability.

European Startup Monitor (2015)The European Start-Up Monitor defines start-ups by three criteria (ESM, 2015):established for less than 10 years; bring innovative technologies and/or new business models sales.

According to the well-known Silicon Valley serial entrepreneur Steve blank, startup is a temporary organization designed to search for a repeatable and scalable business model.

In Algeria, considred as a astartup every company subject to the Algerian law, and respect the following standards :

Younger than 8 years.

The company’s  business model should be based on products or services, business model, or any innovative idea.

The annual turnover must not exceed the amount determined by the National Committee.

The company’s capital must be owned by 50% At least, by specific persons or investment funds.Over a period of time or by other institutions that have obtained a label“start-up company”.

The company's growth potential must be large enough.

The number of workers must not exceed 250 workers.

CHARACTERISTICS

As seen in the definition itself,start ups have different features and characteristics than any other pre existing business enterprises. These are highly innovative and odd structured entities; they have very little scope for organizational formalities/customs. In short all those elements which make a huge organization are completely missing or compromised in start ups, for example organizational hierarchy is absent in start ups. Following is the further investigation in finding out the uniqueness of start ups.

 Innovation/Disruptive

The start ups have the main characteristic of being the most innovative in their approach of serving the customers/market. The level of innovation is accommodated by start up is highest in any other entity which leads to disruption.

Sizes of the company/entity/enterprise

The size of their operations is also very limited which might grow as per the requirement and other factors.

 Organizational structure 

One of the significant characteristic of start up is having a very flat and non hierarchy based structure. Where founder (s) work very closely with the team mates and treat them as part of the innovation rather than employees, in reverse employees work with their full potential.

Rapid growth

Start ups have the tendency to grow fast in terms of revenue and market share as the product and services are being offered are very innovative and new for the customers/market.

 Unconventional sources of financing

Start ups, by their very nature are funded by unconventional sources over conventional sources like banks financial institutions. They are mostly funded by individuals, venture capitalists, angel investors and entrepreneurial funding agencies.

Risk and uncertainties

All the start ups are usually very innovative and deal with uniqueness of product and services. More innovation attracts more risks and uncertainties. One of the most important fixture of start ups is they are highly risky, as the market offerings are very unconventionally offered which as a result, accelerate the level of risks and uncertainties.

Initially focused on singular product/services

Start ups initially (or forever) focus on single product/services to the targeted market. Unlike a company, they are very focused on their product offerings. They offer single product/services to market and after a long while may include some varieties.

Available resources

Contrary to common belief, start ups do not have many resources. They usually struggle a lot to attract resources and often fail in doing so. Once their product or presence is noticed, than only they get much needed resources. It is very unlikely to companies and other business entities.

DIFFERENCES BETWEEN A STARTUP AND SME

Setting up and developing a startup venture can be often very different than running a traditional small or medium sized enterprise (SME). The main differences can be indicated as follows:

Growth and scalability

Startups are different from traditional businesses primarily because they are designed to grow fast. By design, this means that they have something they can sell to a very large market. For most businesses, this is not the case. This is also one of the reasons, most startups are tech startups. Online businesses can more easily reach a large market because people can buy from you or use your product regardless of whether you’re awake or not and whether you’re in London or New York. The distinctive feature of most startups is that they are not constrained by these factors. According to investor and angel entrepreneur Paul Graham, “that’s the difference between Google and a barbershop. A barbershop doesn’t scale.” To grow rapidly, you need to make something you can sell to a very big market. Generally speaking, to operate a business, you don’t need a big market. You just need a market and you need to be able to reach and serve all of those within your market.

The relationship with funding

Apart from having different ways of thinking about growth, startups seek financial investment differently than most small businesses. Startups tend to rely on capital that comes via angel investors or venture capital firms, while small business operations may rely on loans and grants, solely on their own revenue stream. The interesting thing about venture capital is that those providing it, tend to have a more active role in whatever company they are backing. While a small business awarded a grant or loan may occasionally need to report back to their bank, a startup with angel backing will probably be getting a bit more help. They’ll be receiving advice from the investor (after all, the investor is the one taking the biggest risk) and, if you’re young and inexperienced, there’s probably nothing better than a helping.

Planning for the “end,” or the exit strategy

Another thing you’ll want to keep in mind is your vision for your business. If you’re pitching for investment without an exit strategy, you’re unlikely to get it. Investors usually need an exit strategy as they need to maximize their return of the investment. If you’d still like to be running the company in 10 years’ time, you’re probably going to want to ensure that exit plan comes in the form of a steady revenue stream that allows you to pay off investors. “Exit strategy” development is a problem you won’t have with your own business, at least not until you’ve made it big or until you change your mind about owning the business. The point is, in a traditional business (not a startup), you don’t need an exit strategy at the start. You’ll be entirely responsible for the future of your company and it will be down to you whether or not you run it for the rest of your life or decide to sell, merge or launch it on the stock market.

STARTUPS THEORIES

As mentioned earlier, startups are rarely considered as the main focus of theories in different domains. However, there are some theories which could be implicitly considered as “startup theories” in the existing literature. The theories  categorized  in three main areas: (i) organization, (ii) management, and (iii) entrepreneurship.

Organization theories focusing on startups

Van de Ven et al. (1984) were among the first scholars who considered three main approaches toward studying startup creation. They considered entrepreneurial, organizational and ecological approaches; and argued that prior research had only examined one of these three approaches without considering the others. As they pointed out: “The organizational approach argues the conditions under which an organization is planned and the processes followed in its initial development [phase, which] have important consequences on its structure and performance in later life”.

Yet, organization theories are silent on the issue of organizational evolution, or more specifically on startup evolution (Salamzadeh, 2015a). However, there is limited research which investigates the startup phase (e.g. see Boekerb & Wiltbank, 2005). Moreover, most of the existing theories and perspectives in organization science are definedto answer organizational questions. Among these theories, the following are more relevant in studying startups: organizational ecology theory (e.g. see, Scholz & Reydon, 2009), organizational configurations (e.g. see, Miller, 1990), contingency theory (e.g. see, Tosi& Slocum, 1984), resource dependence theory (e.g. see, Davis& Cobb, 2010), uncertainty theory (Kamps & Pólos, 1999), etc. Among the existing theories, Gartner (1985) and Katz and Gartner (1988) are more specifically related to this category.

Management theories focusing on startups

According to its general definition (getting things done through the other people, or coordinating the efforts of people toward common goals), management is about people (Hofstede, 1999). On the other hand, management theories are either “perspectives” or “descriptions of the relationships among organizational characteristics” (Dean & Bowen, 1994). Thus, according to this view, while management theories have less to do with startups in an organizational sense;theyhave more to do with those entities as individuals/teams that coordinate their efforts toward some common goals.Moreover, management theorists and scholars are becoming more interested in studying startups (Davila et al., 2003). Some of the main management theories which used in startup research are as follows: strategic management (e.g. see, Pettigrew et al., 2001), small business governance (e.g. see, Ritchie& Richardson, 2000), human resource management (e.g. see, Miles & Rosenberg, 1983), team management (e.g. see, Kaiser& Müller, 2013), complexity theory (e.g. see &Lan, 2006), etc. However these theories are loosely connected to startup research and are mostly considering startups as their samples or cases.

Entrepreneurship theories focusing on startups

In Van de Ven et al.’s (1984) view, “the entrepreneurial approach argues the characteristics of the founder and promoter of a new organization”. Although this view holds a basic presumption regarding the existing theories, it lacks enough entrepreneurial focus on the phenomenon in question, i.e. startups. Although the founder is important, there are several issues to be discussed, described, and explained by entrepreneurship theories on startups. As Salamzadeh (2015b) argues, entrepreneurship theories on startups fall into two categories: (i) macro level theories (e.g. see, Schumpeter's theory (Schumpeter, 1934), population ecology (Hannan and Freeman, 1977)), and (ii) micro and meso level theories (see e.g. Vesper, 1990; Lim et al., 2008; Bhaves, 1994; Veciana, 1988; Deakins and Whittam, 2000; Núñez, 2007; Serarols, 2008; Samuelsson and Davidsson, 2009).

This category of theories is more focused on startups. This might be due to several reasons. First, entrepreneurship deals with idea, creativity, innovation, new product or service development, opportunity, and the like. Thus, entrepreneurship theories are more prone to be considered in the early stages of any business or organization. These concepts are integral parts of a startup (Radovic-Markovic&Salamzadeh, 2012). Second, going beyond entrepreneurship theories, theories of organization and management will emerge, which deal with managing people and organizations (Van de Ven et al., 1984).Third, startups are about turning ideas into businesses which is a critical point in entrepreneurship studies such as new venture creation, value creation, and opportunity recognition, evaluation and exploitation.

REF

The golabal startup ecosystem report.

Zaeem, Defining a startup- A critical Analysis.

Shekhar Upadhyay, Priyanka Rawal, Start Ups; Let’s Start Them Up - An Inside View in the Indian Start Up Scenario.

Startup manual.

Aidin Salamzadeh, Hiroko Kawamorita Kesim, Startup Companies: Life Cycle and Challenges.