What are startups? This is one of the most common questions for those who want to start a business, invest, or simply understand why some companies grow so fast. In practical terms, a startup is an organization in its initial stage that seeks a... repeatable and scalable business model, operating under extreme uncertainty , Therefore, she validates hypotheses all the time, learns quickly, and adjusts course when necessary.
In this guide, you will see the most widely accepted definition in the market, the differences between a startup and a traditional company, the main types, how startup investment works, and a step-by-step process to go from idea to traction, with metrics and examples to help you remember.
Key points
- Startup It is not synonymous with "new company".“The core goal is to find a model. repeatable and scalable under uncertainty.
- Repeatability It means delivering value in a standardized way, with little customization per customer.
- Scalability It's about growing revenue without costs growing at the same rate (very much related to software, but not exclusively).
- Startups evolve by continuous validation (MVP, (feedback, iteration, and pivot), using metrics such as CAC, LTV and churn.
- Funding can range from bootstrapping a angel investor, seed and venture capital, with implications for equity and governance.
What are startups?
Most widely accepted definition (market/investor perspective)
In the innovation ecosystem, the most commonly used definition emphasizes three elements: business model, growth e uncertainty. A startup is born when it's not yet clear:
- Who is the ideal customer?,
- which value proposition really “sticks”,
- Which acquisition channels work?,
- And how to turn that into sustainable revenue.
Therefore, it's common to see startups testing different versions of the product, prices, and positioning until they arrive at what's called the final product. product-market fit (when the market "pulls" the product).
“"A repeatable and scalable business model under extreme uncertainty"”
This phrase sums up the concept well: the startup tries to build something that can be replicated many times (repeatable) and grow quickly (scalable), even without having all the answers at the beginning.
Instead of “executing a ready-made plan”, the startup discovers The plan unfolds along the way, with experiments and data. This is one of the reasons why methodologies such as Lean Startup They became so popular.
Startup is not synonymous with "new company".“
Every startup is a young company (or a project in its initial phase), but not every young company is a startup. A business can open yesterday and still be a startup. traditional business, with more predictable growth and a focus on operational efficiency from the start.
Practical examples of what it is vs. what it is not.
To differentiate, consider the level of standardization and the potential for scalability:
- It's not a startup (generally): A neighborhood bakery, a local accounting office, a restaurant with a fully in-person operation. These can be excellent businesses, but they typically grow linearly (more customers require more staff, more space, more costs).
- It could be a startup: A management platform for bakeries (SaaS), an automated accounting system with digital onboarding, and a marketplace that connects restaurants to new sales channels.
The key question is not "is it new?", but rather: Is it possible to repeat and scale this without increasing costs proportionally?
Are startups only internet/technology companies?
No. Many startups use the internet and software because it facilitates distribution and scaling, but there are startups that go beyond "just apps," such as... biotech, agritech, deep tech, healthtech and energytech.
Why software makes things easier (marginal cost and distribution)
Software usually has low marginal costOnce the product is ready, serving another customer tends to be inexpensive (compared to producing and delivering physical items).
Furthermore, digital channels aid in distribution: performance marketing, content creation, partnerships, integrations, marketplaces, and remote sales make rapid growth more feasible.
Non-internet startups (deep tech, biotec, agritech, etc.)
Startups can be in sectors like research, hardware, and applied science. The logic remains the same: seek repeatability and scale, even if the path is longer and more regulated.
Examples of common areas:
- Biotechnology (biotech): New diagnostics, therapies, and laboratory platforms.
- Agritech: Sensors, predictive models, farm management, agricultural credit and insurance.
- Deep tech: Innovation based on science/engineering (advanced AI, new materials, robotics).
- Healthtech: medical records, telemedicine, hospital management, patient journey.
Characteristics of a startup (the pillars)
Innovation (no need to "invent from scratch")
Innovation doesn't necessarily mean creating something unprecedented in the world. Many startups innovate by:
- To solve an old problem in a more efficient way,
- improve access (experience and convenience),
- reduce cost,
- or create a new revenue/distribution model.
Sometimes, innovation is more than... business model more than technology.
Repeatability (delivering the same product with minimal customization)
Repeatability means being able to consistently sell and deliver the product/service to many customers without "reinventing" the project every time.
If each new client demands a completely different package, with a high degree of consulting and customization, the company tends to grow more as... service more so than as a scalable startup.
Examples/analogies to reinforce the concept
- Repeatable digital product (e.g., SaaS): You create a system and can serve 100 or 10,000 clients with the same product base, changing configurations and plans.
- Tailor-made service (e.g., customized project): Each new contract requires specific hours from specialists, new deliverables, and a variable scope.
A startup might begin with services for learning, but it usually tries to "package" the learning into a product to gain repeatability.
Scalability (growing revenue without increasing costs at the same rate)
Scalability means growing without "breaking" the operation. In practice, it means that the startup can increase revenue faster than it increases costs, especially variable costs (people, delivery, support, infrastructure).
This doesn't mean that costs don't increase; they do increase, but not in the same proportion.
Unit economics and margin impact
This is where the concept of unit economicsThe mathematics of the unit (per customer, per order, per subscription). A healthy startup understands, for example:
- how much does it cost to acquire a customer (CAC),
- how much revenue does this client generate over time (LTV),
- What is the profit margin per sale?,
- How long does it take for the CAC to pay back (payback)?,
- and what is the impact of the cancellation (churn).
When unit economics don't balance, scaling can only increase losses.
Environment of uncertainty and continuous validation
Startups thrive on hypotheses: "I think this audience has this problem," "I think this price works," "I think this channel brings in customers." The job is to test and validate with speed and discipline.
MVP, feedback, iteration, and pivot (Lean Startup)
The classic cycle is:
- MVP (Minimum Viable Product): The simplest version that allows you to test value.
- Real feedback: Users using (or trying to use) and reacting.
- Iteration: Improve what worked, cut what didn't.
- Pivot: Change direction when the thesis doesn't hold up (audience, proposal, channel, product, or model).
This process reduces waste and increases the chance of finding a repeatable model.
Common metrics (CAC, churn, LTV)
Some metrics appear all the time in startups, especially in SaaS and subscriptions:
- CAC (Customer Acquisition Cost): How much do you spend to acquire a customer? Reference: CAC on Wikipedia.
- LTV (Lifetime Value): How much revenue/margin a client tends to generate during the relationship.
- Churn: Customer churn/loss rate (or revenue).
- MRR/ARR (SaaS): recurring monthly/annual revenue.
- Retention and activation: If people come back and extract value from the product.
Business model: how the startup creates and captures value.
Business model vs. business plan
In startups, the business model It usually comes before (and changes more than) a detailed plan. The traditional plan assumes predictability; a startup, on the other hand, needs a testable model that can be adjusted with data.
Think of it this way:
- Business model: How the company creates, delivers, and captures value.
- Business plan: projections and execution based on more stable assumptions.
Initially, the focus is on reducing critical uncertainties: problem, customer, solution, channel, and monetization.
Useful tools and frameworks
Business Model Canvas (overview of the blocks)
THE Business Model Canvas It helps to quickly visualize the building blocks of the business: customer segments, value proposition, channels, relationships, revenues, resources, activities, partnerships, and costs. Reference: Business Model Canvas.
It's a useful tool because it makes explicit the hypotheses you need to validate.
(Optional) Agility/Agile Manifesto and execution culture
Startups often adopt agile practices to execute in short cycles, with continuous learning. Agile Manifesto It summarizes principles such as collaboration, frequent delivery, and adaptation. Reference: Agile Manifesto.
More than just "doing Scrum," the point is to have a culture of:
- prioritize what generates learning/results,
- measure impact,
- and correct it quickly.
Types of startups (most commonly used classifications)
By ambition/structure
Scalable startups
These are the "classic" high-growth startups that seek large-scale (often global) growth and typically raise investment to accelerate their growth.
Small-business startups
Smaller businesses, sometimes innovative, but with a more limited growth objective, focused on local sustainability.
Lifestyle startups
Designed to support a lifestyle (geographic freedom, autonomy, niche markets). They can be digital and profitable, without necessarily aiming for hyperscale.
Buyable startups
Created with the clear intention of acquisition (M&A). The strategy may be to build a technology, user base, or valuable integration for a larger player.
Social startups
They have a social/environmental mission at their core, seeking impact with financial sustainability (or hybrid models).
Large-company startups (intrapreneurship)
Initiatives within large companies with startup autonomy (small teams, rapid validation), often linked to open innovation and new products.
By business model
B2B
Business-to-business sales. Generally, higher ticket size and longer sales cycle, with a focus on ROI and integration.
B2C
Selling to the end consumer. Scaling can be very large, but it requires attention to branding, retention, and acquisition channels.
B2B2C
The company sells to another company, but the end user is the consumer (e.g., solutions via partners, platforms, and distributors).
By sector (examples of "-techs")
Some common labels in the ecosystem:
- Fintech (financial services)
- Healthtech (health)
- Legaltech/Lawtech (legal)
- Edtech (education)
- Retailtech (retail)
- HRtech (human resources)
- Agrotech/Agritech (agriculture)
To explore sector-specific data and breakdowns, it is worth consulting the material from ABStartups, such as the... Mapping the Brazilian Startup Ecosystem 2024 (PDF) and thematic reports (e.g.: mapping of retailtechs).
How to create a startup (practical step-by-step guide)
Identify a real problem and a clear value proposition.
Start with the problem, not the solution. A good practice is to write:
- who is the audience,
- What type of pain is frequent and relevant?,
- How is this resolved today?,
- and why their approach is better (cheaper, faster, simpler, more reliable).
The more specific, the better: “SMEs in retail” is broad; “fashion stores with 2 to 5 salespeople and a high volume of WhatsApp use” is testable.
Build a prototype/MVP and validate it with customers.
Your MVP doesn't need to be perfect; it needs to be... enough to test.
Common MVP formats:
- landing page with waiting list,
- navigable prototype (Figma),
- Concierge MVP (you deliver manually to learn),
- A simplified version of the product with one main function.
The goal is to validate: Do people understand? Do they want it? Would they pay for it? Would they use it again?
Team building and partnerships (complementary skills)
Startups function best when the team covers:
- product/technology,
- business/sales,
- and operation/execution.
In addition to co-founders, partnerships can reduce costs and accelerate learning (e.g., integration with platforms, distribution channels, communities, universities, and hubs).
Lean operation (costs, coworking, tools)
Initially, spending less increases your "runway." A lean operation typically includes:
- SaaS tools instead of complex infrastructure.,
- simple processes,
- and environments that encourage networking.
Coworking spaces can help not only with costs, but also with connections to other entrepreneurs, mentors, and potential clients.
Initial marketing, distribution, and reputation building.
Many startups fail not because of their product, but because... distribution. Test channels from the start:
- content (SEO, blog, webinars),
- partnerships and integrations,
- outbound (active prospecting),
- communities and events,
- advertisements (when it makes sense within unit economics).
PR and early-stage credibility (when it makes sense)
In the early stages, reputation can be unlocked:
- initial meetings with companies,
- confidence for pilots,
- and talent attraction.
PR works best when there's a real "hook": data, use case, funding round, relevant partnership, industry study, or measurable impact.
Investments and financing in startups (how it works)
Bootstrapping (own resources)
Bootstrapping is building something using your own resources (or those of your own operation). It's common when:
- The business is already generating revenue early on.,
- The team wants to maintain more control.,
- Or the market doesn't require heavy capital for testing.
Advantages: less dilution and more autonomy. Disadvantages: growth may be slower.
Seed capital
Seed funding typically includes:
- building the MVP/product,
- channel validation,
- first hires,
- and the search for initial traction.
At this stage, investors heavily evaluate the team, the clarity of the problem, and initial signs of demand.
Angel investor (smart money)
Angel investors typically enter early, with capital and practical support (the so-called smart money): connections, mentorship, experience and credibility.
According to Anjos do Brasil, the Average ticket price per startup it can be between R$ 200 thousand and R$ 500 thousand, potentially reaching R$ 1 million, ...and group investment is common. Source: Angels of Brazil, What is an angel investor?.
Accelerators and incubators (differences and when to use them)
- Incubators: more closely linked to universities and research, supporting the structuring, technology, and maturation of the project (often with a focus on scientific basis).
- AcceleratorsFocus on rapid execution, mentorship, networking, and, in some cases, investment in exchange for equity.
It makes sense when you need:
- access to mentors and network,
- structure for quick validation,
- and support for preparing pitches and go-to-market strategies.
Venture capital and funding rounds (Series A, B, C…)
Venture capital (VC) Invests seeking high returns, accepting risk, and usually enters when there are clearer signs of traction.
In simplified terms:
- Series A: scaling a model that has already shown strong signs (product and channel).
- Series B/C: expand aggressively (new markets, portfolio, M&A), with a more robust operation.
The market alternates between cycles of "growth at all costs" and cycles of efficiency. Recent trends point to greater demands for... profitability and operational discipline, not just growth.
Equity/shares and alignment with employees (stock options/equity)
Startups often use equity to attract and retain talent when they cannot afford to pay salaries as high as established companies.
Basic care (dilution, governance, expectations)
Before distributing equity or raising capital, it's worth understanding:
- dilution (how much participation is reduced each round),
- rules of vesting (right to equity over time),
- minimum governance (agreements, decisions, roles),
- and alignment of expectations between partners and the team.
A common mistake is capturing data too early without a clear model, which can lead to significant dilution without any real gain in speed.
Startup ecosystem (Brazil and references to guide you)
Where startups develop (hubs, communities, programs)
Startups tend to grow better when they are connected to an ecosystem with:
- innovation hubs,
- coworking spaces and communities,
- events and meetups,
- universities and research centers,
- companies with open innovation programs,
- and investor networks.
This environment increases access to knowledge, talent, partners, and pilot clients.
Overview and mapping (sources for consultation)
For data and snapshots of the national scenario, a useful source is... Mapping the Brazilian Startup Ecosystem 2024 (ABStartups), which helps to understand:
- regional distribution,
- sectors,
- maturity of startups,
- and ecosystem trends.
It's also worth following initiatives and entities in the investment and innovation market, such as... ABVCAP (private equity and venture capital), to understand debates, best practices, and the capital side.
Essential startup glossary (for beginners)
- MVP (Minimum Viable Product): The simplest way to test a hypothesis.
- Pivot: A significant change in direction (customer, product, channel, or model).
- Product-market fit: when the market demonstrates consistent demand and retention.
- Traction: Measurable signs of growth (users, revenue, retention).
- CAC: cost to acquire a customer.
- LTV: Value generated by a customer over time.
- Churn: Cancellation/loss of customers or revenue.
- Pitch / pitch deck: Presentation for investors/partners.
- Valuation: The value assigned to the company in a funding round.
- Exit: Exit/realization (acquisition, merger, IPO).
- Unicorn: startup valued at over US$1 billion.
- Venture builder: An organization that creates startups in a structured way, with a team and a method.
- Open innovation (open innovation): Collaboration between startups and corporations for innovation.
FAQ, Frequently Asked Questions about startups
1) What are startups and why do they grow so fast?
What are startups?Early-stage companies seeking a repeatable and scalable model under uncertainty. They can grow rapidly when they find product-market fit and efficient acquisition channels, especially in digital models with low marginal cost.
2) Does a startup need to have technology to be considered a startup?
Not necessarily, but technology often helps with scalability and repeatability. Still, there are startups in biotech, agritech, and deep tech that aren't "just internet," but use science and innovation to scale.
3) Is every new company a startup?
No. A company can be new and still operate like a traditional business, with linear growth and high dependence on labor per client. Startup involves uncertainty and the search for a scalable and repeatable model.
4) Are startups only apps and internet companies?
No. Software facilitates distribution, but there are startups in healthcare, industry, energy, and agriculture. The criterion is the ability to replicate and scale the model, not the format (app, hardware, lab, etc.).
5) What does "repeatable and scalable model" mean in practice?
Repeatable means delivering the same value proposition to many customers with little customization. Scalable means increasing revenue without increasing costs proportionally, with healthy unit economics and processes that support growth.
6) How does a startup make money?
It depends on the model: subscription (SaaS), marketplace (commission/take rate), consumption (pay-per-use), freemium, advertising, licensing, or enterprise sales. The important thing is to validate early on whether the customer pays and whether the margin allows for growth.
7) What is an MVP in startups and why is it so widely used?
MVP is the minimum viable product (MVP) used to test a hypothesis with the least possible effort. It's used to reduce risk, accelerate learning, and avoid building a complete product before knowing if the market wants it.
8) When does it make sense to raise investment for a startup?
When there's a clear plan to use capital to accelerate something that's already showing signs (product, channel, traction) or when the market demands investment to compete, raising capital too early can lead to dilution without addressing the main issue: validating the model.
9) What does an angel investor do and what is the typical investment amount?
Angel investors provide capital and often help with strategy, network, and experience (smart money). In Brazil, Anjos do Brasil cites average investments per startup between R$200,000 and R$500,000, potentially reaching R$1 million, often in groups.
10) Which metrics are most important for determining if a startup is healthy?
In general: CAC, LTV, churn, retention, margin, and payback. For SaaS, MRR/ARR and efficient growth are critical because they show whether the startup can scale without destroying cash.