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Different Types of Startups
Different Types of Startups
Different Types of Startups
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sinek/
This article explains the Golden Circle, developed by Simon Sinek, in a practical way. After
reading you will understand the basics of this powerful strategic management and leadership tool.
Why are some organizations able to sell more products even though their competitors are equally
good? Why are some leaders more influential than others?
Simon Sinek, an ex-advertising executive and author, studied the success of the world’s leading and
influential leaders and he found that the key to success lies in the way these organization and
leaders think, act and communicate.
The concept or thought model Simon Sinek developed is known as the Golden Circle.
Golden Circle
According to Simon Sinek, most companies have no idea why customers choose their products.
Successful companies, however, let their customer approach driven by three questions that make up
the Golden circle:
https://www.smartinsights.com/digital-marketing-strategy/online-value-proposition/start-with-why-
creating-a-value-proposition-with-the-golden-circle-model/
Simon Sinek found that most companies work from the outside in, that is from the WHAT question.
To understand the Golden Circle, you need to understand what it entails. The WHAT ring of the
Golden Circle represents the products or services a company sells. The HOW is an explanation of
what the company does. In this ring of the Golden Circle, the company explains why their products/
services are better or stand out from the competition. The WHY is about what a company believes
in, not about making a profit. Therefore, inspired and influential companies communicate from the
inside out rather than outside in.
Simon Sinek demonstrated his Golden Circle by using computer company Apple as an example.
Apple starts with the WHY, the centre of the Golden Circle. So instead of communicating what they
do and make and how they do or make their products, they communicate their vision to their
potential buyers. They think differently thereby challenging the status quo. Then they proceed to the
HOW question by informing their potential buyers that their eye-catching designs are easy to use.
Finally, they arrive at the WHAT question: they make computers. Simon Sinek argues that
customers do not buy products because of what companies do but because of why they do it.
Influential companies do not structurally differ from the competition, however their customers think
they do. They want the products of these companies because they are convinced that these
companies are better than their competition, namely they provide an answer the question WHY.
The human brain
Simon Sinek compares the three circles of the Golden Circle to the human brain. The WHAT, or
outer circle is compared to the neocortex. Here is where we find rational thought and language. The
HOW and WHY circles are comparted to the limbic brains. The limbic brains are responsible for
feelings like trust and loyalty and for all human behaviour and decision-making. However, they do
not have a capacity for language. This is why influential companies start from the core question
rather than the WHAT question. They target the decision-making part of the brain and they know
that their potential customers will then rationalize their decisions. But before these potential
customers do this, the influential companies have already more or less reeled in their customers
because they have established a connection. They have created a match between the actual reason
and the underlying decision.
When companies target the neocortex or the WHAT question first, they are appealing to their
potential customers’ rational approach. It goes without saying that these potential customers are
capable of analysing the message but that does not drive their behaviour and produce results. It is
much harder to work towards emotions if you start from the ratio.
Conclusion
If a company wants to be successful, it should focus on the core question in the golden circle, the
WHY. It should explain clearly and honestly why their products and services are the best a
customer can get. Products and services that are based on the company’s true starting point. Rather
than being a competitor to other companies, a company should be its own competitor so that it can
grow stronger and become one of the influential players in the market.
https://www.toolshero.com/leadership/golden-circle-simon-sinek/
https://venturebeat.com/2013/09/22/startup-types/
https://fowndr.com/types-of-startup-companies/
https://www.zdnet.com/article/there-are-six-types-of-startups/
Investors are unique players in the growth process of a business. The level and quality of their
involvement can ultimately help determine a company’s success or failure. It is imperative for
budding entrepreneurs to take the time to learn about the types of investors available and how to use
best practices when approaching them for funds.
5 types of investors
Investors can be called upon during almost any stage in the life of a startup. Below are five of the
most common types of investors, as well as recommendations for when they should be considered.
Banks
Banks are a classic source for business loans, Inc. explains. Loan-seekers will usually be required to
produce proof of collateral or a revenue stream before their loan application is approved. Because of
this, banks are often a better option for more established businesses.
Angel investors
Angel investors are individuals with an earned income that exceeds $200,000 or who have a net
worth of more than $1 million. They are found across all industries and are useful for entrepreneurs
who are beyond the seed stages of financing but are not yet ready to seek out venture capital.
Peer-to-peer lenders
Peer-to-peer lenders are individuals or groups that offer funding to small business owners, Time
reports. To work with these investors, entrepreneurs must apply with companies that specialize in
peer-to-peer lending, such as Prosper or Lending Club. Once their application is approved, lenders
can then determine the businesses they wish to support.
Venture capitalists
Venture capitalists are used only after a business begins to show a significant amount of revenue.
These investors are notable, as they usually invest a substantial amount of money (often around $10
million). They gain most of their returns through “carried interest,” or a percentage received as
compensation from the profits of a hedge fund or private equity.
Personal investors
Business owners often rely on family, friends or close acquaintances to invest in their companies,
particularly in the beginning. However, there is a limit to how many of these individuals can invest
in startups because of legal limitations, Legal Zoom explains. While it may be easy to convince
loved ones to help, thorough documentation is highly recommended.
Related: Why Venture Capitalists and Angel Investors Look at Teams, Not Ideas
When trying to begin a company, entrepreneurs can acquire capital through means other than
investors, Forbes explains. Personal savings and personal borrowing are two common avenues of
doing so.
Personal savings generally come in two forms: cash and cash-equivalent savings, and retirement
accounts. Using your personal savings can be useful. The required money is already on hand, and
there is no need to go into debt to obtain it. However, the personal savings option may also be a
difficult avenue to pursue. Quite often, entrepreneurs seek out investors in the first place because
their personal savings simply aren’t substantial enough for their needs. It is also personally difficult
for many people to gamble with money they may later need for other purposes, such as retirement,
college funds for their children or personal debts.
Personal borrowing is useful for entrepreneurs with particularly strong credit scores (700 or higher)
and a high personal net worth. To obtain capital for their new business, these individuals may take
out a personal loan or apply for a new credit card. The risk (as with borrowing of any type) is the
possibility of falling behind on payments, lowering your credit score and sinking further into debt.
Choosing an investor is about more than simply trying to acquire funds. It also implies a certain
level of commitment. You should take stock of the expertise you need and the expectations you
have before deciding to approach a particular investor, according to Entrepreneur. When it comes to
potential investors, you should consider their recent dealings, the services they might provide, the
expectations they have for company leaders and how involved they want to be in company
operations.
Although finding investors may seem daunting, it only requires searching in the right place. You
can take advantage of investor databases such as AngelList, Angel Capital Association or Angels
Den to get started. Self-promotion also helps. Writing blog posts, networking and participating in
community business activities can result in investors going after entrepreneurs instead.
To improve your chances of gaining funds, you should narrow down your list of potential investors
to only those who seem appropriate. Criteria for this list can be items such as the investor’s previous
partnerships, reputation or any mutual connections. The list should include around 30 to 50 names,
which you can put into a spreadsheet with other relevant information for easy reference.
Once you have an investor’s attention, a sales pitch is your chance to clinch the deal. It (literally)
pays to prepare. Think of the selling points that speak best to the unique audience you’re
approaching. Create a “hook” at the beginning of your pitch and make sure it leads into a discussion
of how your product or service will solve a problem. It’s also important to have a clear business
plan and discuss how the investor will profit.
Ultimately, entrepreneurs who take the time to find investors tailored to their specific financial and
operational needs will build the foundation needed for a long and successful partnership.
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