Startups and Small Businesses

business-startup

Over and over again you hear this term from left to right: Startup! Too often we think of a small company type. But have you ever stopped for a moment and wondered, “What really is a startup?”

Is it simply a trendy expression for a quickly developing tech organization, or is there a genuine and significant contrast between what establishes a startup and what qualifies as a “small business”?

Truth be told, there is a genuine contrast between a small business and a start-up. We went through the specific definitions and today we give you genuine clues about them.

Why do startups talk so often about investors and stocks?

Small businesses and startups have one thing in common: the challenge of finding financing options. Because opening a coffee shop and running it successfully is often associated with considerable costs.

With traditional business models, founders often turn to traditional banks or online lenders. They carefully check that the risk is not too high, then offer principal amounts and charge interest on the financing. Small business founders often remain 100 percent shareholders in their business.

Startups tend to take a different approach. Since the risk is often significantly higher here, startup founders like to turn to venture capitalists or angel investors. Although they also carry out extensive review processes, they are prepared not to receive any guarantee of their financing when in doubt. In exchange for capital, the founders give their investors shares in the company so that they can recoup a multiple of their investment in the event of a subsequent sale.

When startups and small companies choose a path without external financing, they speak of the so-called “bootstrapping”.

And how is the future different for startups and small businesses?

startups are assumed to be temporary. If all goes well, the supplier of the product will be established. From time to time it is made public. In these successful cases, we speak of the so-called “unicorns”. Extremely rare exceptions, which nonetheless keep the motivation of many founders and investors high.

And even if they don’t fully explode, the business model can turn into a lucrative venture. Once the idea has been established, that is, tested, the old startups become permanent companies.

Of course, every entrepreneur has different intentions about what to expect from their company, but in general, all founders have the intention of starting self-sustaining and sustainable businesses. And that definitely includes a lot of joy, energy, and a little bit of luck. Visit https://www.lifetakesvisa.com/routing-number-for-chime-bank/ to find out more.

The Corona Pandemic – A Challenge To Startup Businesses

The corona crisis hits startups particularly hard. More than 90 percent are affected.

In the end, it got worse than feared: In the survey on the effects of the coronavirus, it was assumed that many startups were affected (nine out of ten). The scene had never been so existentially affected. Startups are often small companies that depend on private capital. If that doesn’t happen, they have a problem. The current crisis also hits startups particularly hard because many have no financial reserves.

Corona crisis: State aid does not benefit all startups

The federal association surveyed over 1,000 startups. The result: Around 91 percent of companies are affected by the corona pandemic. With only a few exceptions such as the construction industry, all sectors are affected equally often. Over 80 percent of those questioned are also at risk of their existence due to Corona. The measures against the coronavirus are causing companies to complain about more and more delivery failures.

Another finding of the study: The threat to startups will be acute for both large and small startups in the next six months. Startups with an upcoming round of financing are particularly affected. Some government aid, such as short-time work helps startups – but not all. Many startups are classified as “not bankable” and therefore cannot apply for a loan but sort to alternative financial solutions (https://looselending.com/). Nevertheless, two-thirds of the startups plan to use government aid measures.

State aid: The startup association proposes this measure

Larger companies with a capitalization of 50 million euros will probably receive support from the planned economic stabilization fund. An estimate of around 150 to 200 startups fall into this category. Smaller companies with few employees can rely on emergency aid from the federal and state governments. For example, there are 9,000 euros for affected companies with less than five employees.

According to the WHO, Europe is the region most severely affected by the coronavirus pandemic in the world. However, medium-sized companies are left behind for a while. According to the study, startups need help over the next few weeks to avoid bankruptcies. The federal association has therefore drawn up a four-stage plan to hopefully be able to avert the disaster.

These include so-called matching funds, in which not only the state but also private investors help – mostly in a ratio of 70 to 30. An estimate states that the startup scene needs a single-digit billion amount to be able to catch all healthy startups. It is in hope that the federal association can do this together with politics.