All businesses start with the aim of creating and capturing value. An entire apparatus has to be built that enables the creating and subsequent delivering of value to the consumers while a complimentary mechanism has to be setup that enables the business to capture the value.
A business creates value when the value of the output of the activities that a business undertakes is more than the value of the inputs of the business. For example, a farmer converts his labour, his machines, seeds, water and fertiliser into food grains. The value of food grain, which is used to make food is more than the combined value of the famer’s labour, machines, seeds, water and fertiliser. In modern life, money is the embodiment of that value. Thus, people pay money in exchange for the value that the business delivers. In the farmer’s example, if the farmer does not sell the food grain he produced, no one actually enjoys the fruits of his labour, and even though the farmer created value in the form of food grain, until it gets sold the value does not captured. And therefore, payment of money in return for the consumption of any good or service is the capturing of value. While creating value involves the sweat and blood of the people at the business, the capturing of value is the cadence of the shuffling of currency notes, the sound of the POS machines and SMS beeps of the people paying for the value that the business delivers.
Broadly, a business is meant to deliver value, generate profits and employ people. A startup delivers value and employs people, but it seldom generates profit for a significant amount of time.
A startup is a peculiar entity. It defies conventional business logic and yet it creates much more sense today than at any time before in history.
According to the Government of India, an entity shall be considered as a ‘starfup’ –
a) Up till five years from the date of its incorporation/registration,
b) If its turnover for any ofthe financial years has not exceeded Rupees 25 crore, and
c) It is working towards innovation, development, deployment or commercializalion of new products, processes or services driven by technology or intellectual property;