Challenges of Financing a Digital Startup

A brief observation of the French economic landscape, and even on a global level, as it exists nowadays allows for full awareness of the importance of the place occupied by startups today. Indeed, it is clear (figures supporting) that the number of startups, and correspondingly working structures for their proper development, continues to grow each year.

 

startup

 

This enthusiasm for these “new” economic actors, whose the definition is actually very similar to the “creation in business” (since “startup” literally means “society that starts”) already goes back several years ago. So, even if this conception of companies has existed for almost a century, it only became really popular until the 1990s with the extensive development of information and communication technologies (ICT).

 

It should be noted that although the term “startup” has exploded with the advent of ICT, it’s not  exclusively reserved for companies in this field, and can concern extremely various sectors (such as  environment or health). Anyway, this term is now so publicized that it is not uncommon that it is diverted from its real meaning and is subject to confusion. Indeed, a plethora of companies which have not intended to enter into the definition of a startup are wrongly qualified as such, sometimes simply by “ignorance”, sometimes entirely voluntary (with the sole purpose to ride on the popularity of this term).

 

During the life of a startup, as in the life of any organization, there is a succession of phases, with various roles, but just as crucial to the survival of the entity. Thus, in the formation of a startup, two stages appear as fundamental: the initiation and the development. Indeed, once its development is completed, the startup has vocation to disappear to transform into a society (the primary purpose of a startup may not be to persist indefinitely in this form). During these two critical phases (the mutation of the startup into a society could also be selected as one of the decisive phases, but as part of this technical file, we do not process it), the same problem keeps coming back to the startup: the funding one. Indeed, startups haven’t a viable economic model enabling it a sustainable existence, it must find the resources (including finances) in all the phases that make up its life.

 

Today, funding opportunities for startups are such that an intense reflection is imposed before making a choice about the system to adopt. Especially since this funding will play a key role not only for the boot process of the startup, but also for its development. However, and this is one of the mistakes that many startups do (as institutions and people that make up this ecosystem), a successful financing does not imply the economic success of a startup. Indeed, many startups received substantial funding and were conducted smoothly, but were not allowed to thrive. Thus, beyond the essential question, certainly, but insufficient of the funding, there are many other parameters to control to hope to achieve a successful Startup…

WYWYDRA_Alexis_PHOTO_2015DRA Alexis

Étudiant en Master 2 de Droit de l’Économie Numérique à la Faculté de Droit, de Sciences Politiques et de Gestion de Strasbourg, et membre actif de l’association MédiaDroit.

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