Understanding Startups: Key Differences with Traditional Companies

What is a Startup and How Does it Differ from a Traditional Company?

In recent years, the term “startup” has become increasingly common, often evoking images of young visionaries and cutting-edge technologies.
But what does startup mean and how does it differ from a traditional company?

A startup is not just an emerging business led by young entrepreneurs, but a true engine of innovation, ready to challenge the status quo and redefine the future of global markets.
Let’s explore the concept of a startup and its distinctive characteristics, analyzing the incentives available for innovative new companies and comparing startups to traditional companies.

What are Startups? Meaning and Definition

The term startup can be defined as a new, usually tech-driven, growth-oriented business characterized by a high degree of innovation and a high potential for scalability.
Startups are young and innovative companies aiming to grow rapidly and scale their business model.

What does startup mean is a common question, and the answer may vary slightly depending on the context.
However, the distinctive element of startups is their innovative nature and the ability to develop new markets or revolutionize existing ones.

According to Eric Ries, author of “The Lean Startup,” a startup is “a human institution designed to create a new product or service under conditions of extreme uncertainty.” Paul Graham defines startups as “a company designed to grow rapidly.”

Startups often operate in high-tech sectors such as software, biotechnology, renewable energy, and other innovative fields.
These companies typically start with a disruptive idea and a small team, aiming to develop a product or service that can be quickly iterated and improved in response to market feedback.

Incentives for Innovative Startups

In Italy, under Legislative Decree 179/2012, for a company to be considered an innovative startup, it must meet at least one of the following requirements:
– Incurred R&D expenses amounting to at least 15% of the higher value between cost and total production value;
– Employ highly qualified personnel (at least 1/3 PhDs, PhD students, or researchers, or at least 2/3 with a master’s degree);
– Hold, be a licensee of, or own at least one patent or be the owner of a registered software.

Innovative startups in Italy benefit from a wide range of incentives and support measures designed to facilitate growth and development.
These benefits aim to reduce initial costs, facilitate access to financing, and promote innovation.

Among the most relevant incentives are:
– Tax benefits: innovative startups can enjoy significant tax exemptions and reductions, such as exemption from registration tax, chamber fees, and government taxes in the early years of operation.
Additionally, individuals investing in innovative startups can benefit from tax deductions.
– Access to credit: various measures have been implemented to facilitate access to credit for startups.
For instance, the SME Guarantee Fund allows startups to obtain public guarantees to facilitate access to bank financing.
– Support for research and development: innovative startups can access subsidized financing for research and development projects.
This includes non-repayable contributions and tax credits for research, development, and innovation activities.
– Innovation and internationalization: specific programs support startups in the internationalization process and the development of innovative technologies.
These programs offer counseling services, training, and funding for expansion into foreign markets.

Furthermore, there are specific calls for those wishing to start a startup with deadlines and requirements tailored to support growth and development.

Differences Between a Startup and a Traditional Company

While startups and traditional companies share the common goal of generating profit, there are several fundamental differences between them.
Here is an overview of the main differences:
– Innovation: startups are characterized by a high degree of innovation.
While traditional companies can also innovate, startups are often built around an innovative idea aimed at revolutionizing an industry or creating a new market.
– Scalability: startups are designed to scale rapidly.
This means that their business model is built to grow exponentially, often through the use of technology.
Traditional companies, on the other hand, may have a more stable and linear growth rate.
– Funding: startups often seek funding from venture capital, business angels, and crowdfunding, while traditional companies tend to rely on bank financing and reinvested profits.
– Risk: startups operate in conditions of high uncertainty and risk.
The likelihood of failure is higher compared to traditional companies, but the potential return on investment can be significantly higher.
– Organizational structure: startups tend to have more flexible and less hierarchical organizational structures than traditional companies.
This allows for greater agility and adaptability to market changes.

Steps to Open a Startup

Launching a startup requires a combination of innovative ideas, careful planning, and access to the right tools and resources.
Here are some fundamental steps to open a startup:
– Idea and market research: it all starts with an idea.
Conducting in-depth market research to understand if there is demand for the product or service you intend to offer is essential.
This includes analyzing competition and identifying the target audience.
– Business plan: a detailed business plan is crucial.
This document should outline the business strategy, revenue model, marketing plan, financial forecasts, and funding requirements.
– Legal form: choosing the company’s legal form is an important step.
Common options include setting up a limited liability company (LLC), a joint-stock company (JSC), or other legal forms suitable for the startup’s specific needs.
– Registration and compliance: registering the company with the Chamber of Commerce and obtaining all necessary licenses and permits are mandatory steps.
It is also essential to ensure that the company complies with all current regulations.
– Funding: finding the financial resources needed to start and grow the startup is one of the main challenges.
This can include accessing bank financing, venture capital, business angels, crowdfunding, and public calls.
– Team: building a strong and competent team is essential for the startup’s success.
This includes not only co-founders but also key initial employees who will play a crucial role in the company’s early development.
– Product development: developing a prototype of the product or service and testing it in the market is a critical step.
Customer feedback is essential to iterate and improve the product.
– Marketing and launch: creating an effective marketing strategy and launching the product in the market.
This includes promotional activities, branding, public relations, and sales strategies.