Contributor(s): Ivy Wigmore

A startup is a newly formed business with particular momentum behind it, based on perceived demand for its product or service. The intention of a startup is to grow rapidly as a result of offering something that addresses a particular market gap.

A startup usually involves innovation, offering a new concept or something that is not widely available. The perceived market gap drives expectations of rapid growth and, as a result, investment that will help fuel that growth. However, there is also risk involved because the business concept is unproven.

The term startup was popularized in the 1990s, during the dotcom era. Internet startups, which were expected to enjoy unprecedented success, often attracted venture capital. Because of the optimistic market, investors sometimes encouraged startups to focus on scaling upward rather than on realizing early profits or even documenting a path to profitability. That optimistic market led to the dotcom bubble and the subsequent crash as many startups failed. 

On the other hand, many successful startups of the dotcom era, including Amazon and eBay, are still in business. 


This was last updated in June 2013

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