Nuts and Bolts: Characteristics of startups explained

AC Group’s Tap & Go has revolutionised public transport. / File.

For the last few years, Rwanda has been buzzing with startups, local and international. While Tap & Go by AC Group has revolutionized public transport and Zip Line which delivers blood products  to health centers are more popular, there hundreds of startups operating in different areas such as technology, transport, tourism and hospitality.

Here are things you need to know about startups and how they work.

 

Growth focused

 

A startup is different from a traditional business venture, for most notably the way they think about growth. By design, this means that they have something they can sell to a very large market. For most businesses, this is not the case.

 

Startups are not necessarily technology-focused though most startups are tech startups. This is mainly because online businesses can more easily reach a large market because they traverse time and space – people can buy or use product regardless of whether you’re in Kigali or New York. The distinctive feature of most startups is that they are not constrained by these factors.

That said, not all technology companies have large markets. A software written in Kinyarwanda for Kinyarwanda school teachers has got a much limited market.

Rely more on funding for capital

Apart from having different view of “growth,” startups seek financial investment differently compared to most small business operations. Startups tend to rely on capital that comes via angel investors or venture capital firms.

With each series of funding, the startup founder gives up a piece of her company–this is called equity, and everyone who has it becomes a co-owner of the company.

Assumes a lot of risk

A startup often tries to ensure that its vision of a product or service does indeed disrupt a market. Though lots of research and time go into the pre-launch of a startup, entrepreneurs are essentially making an educated bet that their idea is going to make it on the market. Oftentimes, it doesn’t. Investing your time and money into a startup is a huge risk.

Advantages of a startup as opposed to small business

Despite the fact that startups involve more risks, there are two main advantages that make them worth it.  

Novelty and agility

Startups have more novelty than other businesses, and people crave novelty in their purchases and daily lives. Startups make more surprising, more interesting, and oftentimes, more valuable.

Big businesses are often forced to make decisions via bureaucracy or with teams of people, making them slower and less able to adapt. Startups are much faster, giving them more opportunities to change and grow.

ailiza@newtimesrwanda.com

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