Reading Time: 2 minutes
In business terms, a startup firm is defined as one that is a ‘new entrepreneurial venture’. Such a business attempts to create a significant space in a fast-growing market.
A growing trend in startups is technology, let’s call them tech startups. In this seemingly borderless world of technological spillovers and knowledge sharing, a tech startup is an ideal way to reduce information asymmetry. Not only can these ventures provide new products and services, they also seek out more creative ways to deliver existing commodities, in a manner that is more effective for their target audience.
The rapid increase in the number of startups is a global phenomenon which is spreading across the developing countries as well as more developed economies. International startups, and expansion by local startups into global markets, are likely to generate a revenue stream for the host country, thus causing the overall standard of living to increase over time.
Initially, costs for a startup firm tend to be relatively high. However, if they are able to push through the first phase of business with limited resources, the rewards will be in line with their competitive environment. In order to facilitate research and development when establishing startups, there are several fundraising options including both governmental and private donors.
In light of the above, it is essential to highlight the importance of having a suitable, yet flexible, managerial style to ensure the sustainability and success of the startup business. A startup’s CEO has the pressure of ensuring the long-term promotion of the company, at the same time as fostering an organisational culture that is distinctive enough to add value to his or her market offering.
In most firms that are starting out, the managerial style adopted is one that incorporates the “entrepreneurial vision”, where the primary focus is on the execution and delivery of the business’s core product. Although this provides the team with a direction, it may fail to be productive in the successive stages of growth. A leadership of this nature involves the equivalent of college “all-nighters” as “weekend all-nighters” as the board vision combined with the evolving work pathway pushes the employees to go over and above their 100%.
In the early stages this method takes the employees on the journey alongside the CEO, with a more personal model of communication. The difficulty arises when they experience rapid growth, whether that be in size, finances, costs and employees. With an increase in any or all of these factors, the separation between the CEO and the employees widens. This could compromise the enthusiasm that developed in the first phase of the business. I have heard it said that, on average, around 40% of a turnover can be directly linked to the engagement of employees. This growth stage is an indicator for the management that they need to transition from a startup attitude to a more scale-up/expansionary vision i.e. to say that instead of “push” approach, a “pull” strategy from management would be better suited for the purposes of team building.
On the international scale, there are several successful startups that have grown into well-established firms: Uber, GitHub etc. The future prospects of startups are indeed lucrative if they have a good product offering, team culture and an adaptable managerial style that is open to change.