What’s the difference between a “startup” and just a new company?
In: Economics
Start-ups are companies that are entering young or non-existent markets. They have the potential for enormous growth, but also a high chance of failure.
Because of that they don’t get capital investment the regular way, like bank loans, but instead use venture capital or crowdfunding.
They usually start off very small, developing a product to sell in the first place. This period is the most difficult one, since they only run at a deficit and if they run out of capital or can’t find new investors, before finishing the product the start-up fails.
Examples are SpaceX, Rocket Labs or Virgin Galactic in the commercial space sector. This is a young market, merely a couple years old. They have to develop a lot of rocket technology, but will be worth billions if they succeed in the long term.
Then there is creating new markets, like carbon capture. There is no viable solution to carbon capture at the moment, but many start-ups are trying to find one. The first one to do so, will be rewarded with a lot of contracts and money.
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