What is a startup company? An easy-to-understand explanation of the differences and characteristics of venture companies!

In recent years, many people are finding employment or changing jobs at startup companies because they are attracted to the speed with which they launch new businesses and grow. Start-up companies refer to emerging companies with new business models, but what are their characteristics and business examples?

In this article, we will provide an easy-to-understand explanation of examples of startup companies and how they differ from venture companies.

Certainly! Let’s break down the concepts of a startup and a venture company:

Startup Company: A startup is a newly established business that is designed to develop and bring innovative products or services to the market. These companies often begin with a small team of founders who share a vision and aim to solve a specific problem or meet a particular need in the market. Startups are characterized by their agility, risk-taking nature, and a focus on growth.

Key Characteristics of Startups:

1. Innovation: Startups typically introduce new ideas, products, or services that may disrupt existing markets or create entirely new ones.
2. Scalability: Startups aim for rapid growth and scalability, meaning they have the potential to expand their operations and customer base quickly.
3. High Risk-High Reward: Startups often involve a high level of risk, but success can bring substantial rewards, both in terms of financial gains and market impact.
4. Limited Resources: Startups often operate with limited resources, and founders may wear multiple hats to handle various aspects of the business.

Venture Company: A venture company, also known as a venture-backed company, refers to a business that has received financial backing from investors, known as venture capitalists (VCs). Venture capital is a form of private equity funding provided to startups and small businesses that show high growth potential in exchange for equity ownership.

Key Characteristics of Venture Companies:

1. External Funding: Venture companies raise capital from external sources, such as venture capital firms, to finance their operations and growth plans.
2. Investor Involvement: Venture capitalists not only provide funding but also often take an active role in guiding the company, offering strategic advice, and helping with important decisions.
3. High Growth Expectations: Venture-backed companies are expected to achieve significant growth within a relatively short period. Investors seek returns through a successful exit, such as an initial public offering (IPO) or acquisition.
4. Exit Strategy: Venture companies usually have a clear exit strategy in place, outlining how investors will realize their returns on investment. This may involve going public or being acquired by a larger company.

In summary, a startup is a new and innovative business, while a venture company is a startup that has received external funding from venture capitalists. The infusion of capital and expertise from investors distinguishes venture companies and fuels their growth aspirations.

What is a startup company?
The term “startup company” comes from the word “startup,” which means to begin or start a business, and refers to an emerging company that aims to develop and provide new products and services based on innovative technology and ideas.

Some of the world’s most successful startup companies are companies with the following business models.

A business that connects those who rent accommodation facilities with those who want to rent them.
A business that connects people who want to travel by taxi or car with people who provide that service.
A business that provides multifunctional communication tools that can be used both inside and outside the company.
Start-up companies have been recently established and often have a small company base and few employees, but they have high potential for rapid growth as they aim to enter the market with new products and services. .

Among startups, unlisted companies that have been established for less than 10 years and have a valuation of over 140 billion yen are called “unicorn companies.” Unicorn companies based in Japan include the following companies.

Cloud service for personnel and labor management
Deferred payment service for online shops
News app for smartphones
Although the amount of investment for domestic startups is on the rise, it is still low compared to the United States, China, and Europe*.

The reason why there are so few startup companies in Japan is that there is a lack of human resources to support entrepreneurs and their growth, and that it is difficult to develop businesses over the long term through financing.

In recent years, private companies and the government have been promoting startup support in Japan, as well as collaborating with universities and other educational institutions, so there is room for the number of startup companies to increase in the future.

*Reference: Ministry of Economy, Trade and Industry “About startup support – Ministry of Economy, Trade and Industry’s efforts in terms of funding”
Difference between startup companies and venture companies
A word similar to startup company is venture company (emerging company), but both companies have in common that they aim for rapid growth by developing products and services based on new technologies and ideas.

Companies that invest in start-up companies are called “venture capital”, and the aim is to increase profits when the invested company goes public and sells. Venture companies further increase their corporate value while receiving investment and subsidies from venture capital and banks.

Below, we will look at the differences between the two from the perspective of growth stage, business style, and scale.

growth stage
Start-up companies are often only a few years old.

Venture companies may also be just starting up, but they often refer to companies that have discovered a competitive advantage in their products or services and have entered the stage of expanding their market by repeatedly modifying their business model.

How to do business
Looking at the position of companies in the market, startup companies aim for rapid growth by cultivating new markets from scratch, while venture companies aim to increase profits and grow their business in existing markets. They differ in that they aim to expand their business.

Company size
Start-up companies are often made up of a few founders who share the same ideas as the founder, whereas venture companies have managers and several members in each department. In many cases, the company has grown to a size where it is possible to do so.

Characteristics of startup companies
Looking at the way of working at a startup company, it is characterized by the fact that employees can be involved in the launch and growth of new businesses, and that they have a lot of discretion and a lot of motivation depending on the employees. Let’s take a look at the characteristics of startup companies when compared to large companies below.

have innovative technology and ideas
A characteristic of startup companies is that they develop unprecedented new products and services based on innovative technologies and ideas.

In some cases, the purpose of founding a business is to solve problems that cannot be achieved using traditional business models, such as environmental problems, population decline, educational disparities, and poverty issues.

focus on philosophy
We place the utmost importance on the idea of what kind of society we want to realize.

Then, we aim to commercialize the idea by gathering people who sympathize with that idea and turning it into a business, and by raising funds from investors who sympathize with the idea.

quick decision making
Start-up companies are in the stage of repeatedly verifying and improving their products, services, and business models, so a sense of speed is important.

As a result, business policies once decided may be changed within a day, and because decisions are made quickly, there are many changes in the workplace environment.

People suitable for start-up companies
Many people seem to find the idea of being involved in the launch of a new business appealing, and consider joining a startup company or changing jobs. Below, we will introduce the main characteristics of people who are suitable for startup companies.

flexible and adaptable
Since the work environment is subject to many changes, it is important to have the ability to accept things and situations flexibly and respond to changes.

Due to the speed at which companies grow and the number of changes within the company, it would be better for you to enjoy change rather than having an already established organizational structure or way of proceeding with work.

High desire to grow
In order to grow the business with a small number of talented people, we need people who are proactive and have the desire to grow.

No matter what the situation, people who follow through on what they say through trial and error, act energetically and at the same time self-reflect, and follow through on what they have decided are ideal for startup companies.

have diverse skills
In startup companies that require human resources, there are times when one person may have to perform multiple roles. Those with diverse skills and the mindset of eagerly learning new fields will be highly valued.

How to change jobs to a startup company
The key to changing jobs to a startup company is to find a company whose philosophy you can relate to.

By using job search engines, you can narrow down your search for companies by job type and industry. Another way is to attend events related to managers or themes that interest you.

In addition to gathering information about companies, do self-analysis and inventory of your career to organize your strengths and skills.

By first clarifying your strengths and getting to know a variety of companies without narrowing down your requirements, it will also help you deepen your self-understanding, such as how they are evaluated in the labor market and the conditions you cannot compromise on.

summary
Start-up companies are companies that develop and provide new products and services based on innovative technologies and ideas.

Start-up companies offer a lot of discretion and are rewarding, making them popular places to work or change jobs for people who value personal growth at work or who want to create new market trends.

While sorting out the points you want to focus on when working and your own strengths, look for companies that are active in the industry or field you are interested in.

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