What Is a Startup? (With Frequently Asked Questions)

By Indeed Editorial Team

Published 26 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Working in a startup often involves multitasking and innovation. There are many types of startups in different industries. Learning about various types of startups can help you understand the early stage of a company's business development and if they're an ideal work environment for you to develop your career. In this article, we answer "What is a startup?", outline major types of startups, list the characteristics of successful cases and share example sources of technical and financial support for startups.

What is a startup?

If you're wondering the answer to "What is a startup?", they're companies in the beginning stage of developing a business model. Individuals or a few founders with the same or similar core beliefs often establish and fund startups. These companies focus on providing products or services that the founders believe there is market demand for and has the potential to generate profit. With limited capital, resources and employees, the business model of startups is usually not comprehensive enough.

A startup doesn't refer to a permanent phase of the business life cycle. Instead, once a startup reaches around three years of age, the market views it as an established company. Startups strive to grow and scale by seeking various capital sources, partners or investors. They pursue opportunities to grow and develop by means of financing or external investment to move forward to the next phase of the business cycle. When a startup is generating profits consistently, it's considered to be in the growth stage.

5 major types of startups

Here are various types of startups with different goals:

1. Small-and-medium enterprise (SME) startups

Founded by self-starters or a small group of partnerships, the market regards SME startups as independently or privately owned businesses. The description of their size depends on the number of their employees or the amount of their revenue. Their business models start with a founder's core beliefs. These companies prefer to accelerate growth at their own pace by staying self-funded, rather than seeking funds from external investors. They usually expand their revenue or explore their industry by using proven business models.

2. Buyable startups

With the ultimate goal of being acquired by industry giants, small teams establish buyable startups. Software and technology development companies often belong in this category. They aim to create notable applications and seek to enter into mergers and acquisitions to generate wealth or further explore the potential of their creations.

3. Scalable startups

Scalable startups generally seek various capital sources, partners or investors to strive for exponential growth. These companies raise funds by identifying external investors, such as angel investors, venture capitalists or business partners, to support their growth initiatives and pursue opportunities to develop a more robust business model. This type of startup often relies on charismatic founders that have strong negotiation skills.

4. Offshoot startups

Offshoot startups are branches split from large parent companies. When a large corporate with sufficient capital and market presence is interested in the entry of a new market, it can incorporate an offshoot startup to develop a different business model. While a parent company stays in its niche, it can expand into a new market segment through an offshoot startup. These startups act independently of their parent companies for innovation and exploration of profitable business models in a new sector.

5. Social startups

Social startups are non-profitable organisations that focus on charity. The operations of these companies are the same as other types of startups. The goal of these startups is to generate wealth for the sake of philanthropy to create a better future or help the needy.

Key characteristics of successful startups

Here are some key characteristics that make a startup successful:

  • Innovative: It's important for startups to have innovative products or business models.

  • Problem-solving: A successful startup creates unique and irreplaceable products or services to solve problems faced by its target consumers.

  • Fast-growing: It's essential for startups to grow faster than competitors to build market share.

  • Scalable: It's beneficial to have a business model that can achieve exponential growth with proportionally low costs.

Example sources of technical and capital support

Here are some example sources of seeking technical and capital support:

  • Start-up Express: The Start-up Express is a startup development programme hosted by the Hong Kong Trade Development Council. Its target participants are startups with products or services suitable for the mass consumer market and have a strong desire to enter the international market.

  • Hong Kong Science Park (HKSTP): HKSTP supports many research and development practitioners from innovation and technology companies, including private and public sector partnerships.

  • The China Innovation and Entrepreneurship Competition of Hong Kong, Macau and Taiwan: Several government departments and initiatives jointly organise this competition to provide entrepreneurs with coaching, industrial cooperation, capital assistance and media publicity. The target participants are startups in the innovative and technological spectrum.

6 frequently asked questions about startups

Here are answers to some frequently asked questions about working in startups:

1. How do I choose the right startup to work in?

Choose an industry you're interested in if you want to develop your career in a startup. As a startup company lacks a fully developed business model, many aspects of its operations are to be built or enhanced. If you have passion or devotion to work in a related field, you may get strong job satisfaction from helping build or develop a startup.

Related: Why Is Company Culture Important? (With Interview Questions)

2. What qualifications do you need for joining a startup?

A highly specialised skill set can help increase your chances of getting hired to fill specific roles. Specific qualifications or several years of work experience in a particular industry can showcase that you're well equipped for a position. A proven track record of accomplishments, such as previous projects or a portfolio, can also help assure hiring managers of your potential contribution. Experience working in startups can show your ability to work within the startup environment.

Related: 15 CV Objective Examples (And How to Write One for Your CV)

3. What are the achievements of working in a startup?

As startups usually have a simple structure with a small number of employees, startups prefer staff to handle more roles and responsibilities. You have opportunities to be involved in many aspects of projects and gain a thorough understanding of project development and management. This results in opportunities to learn different skills, discover your potential or expose new areas of interest, helping to enrich your CV and develop long-term growth.

Related: 20 Important Life Skills to Support Your Career Success

4. What is the promotion prospect or career path of working in a startup?

A streamlined structure usually shows greater transparency of a company's affairs. Your full involvement in a project provides you with practical training and all-around expertise in a field. If you join a startup at an early stage, you have a higher chance of becoming a core team member. If you want to change your work environment in the future, your startup experience may provide you with a broader knowledge and skill base to apply for different roles.

Related: How to Answer the Interview Question “Why Do You Want to Work Here?”

5. What are the main differences between working in a startup and a large corporate?

Startups often streamline the division of labour. There are usually only a small group of people working together, so each employee may have multiple roles. Without a fixed role, startups often prefer you to make contributions wherever you can. Startups haven't developed a comprehensive workflow or hierarchy yet because these structures often take time to establish. With a lack of funding, startups prefer you to be adaptable to different jobs and responsibilities.

6. Which one is more suitable for me, startup or large corporate?

There are different factors to consider when deciding to work for a startup or a traditional corporation, such as the work culture, benefits and compensation, personal growth and career prospects. Explore your own preferences to figure out which kind of environment is more suitable for you.

If you're interested in a specific sector, you can research job vacancies to see whether you fulfil the job requirements of any positions. If you want to participate in different roles and explore your career interests, startups may be more beneficial to your personal development. It's important to focus on the long-term development and direction of your career path.

Please note that none of the companies, institutions or organisations mentioned in this article are affiliated with Indeed.