What Is a Startup?
January 31, 2024 · Start-up Visa · 13 min read
Startups are often described as a national asset. That is why governments around the world are promoting entrepreneurship and introducing policies to attract talented founders from abroad to build businesses in their countries. Canada’s Start-up Visa Program is a prime example. Below, we answer the question “What is a startup?” and cover the key concepts investors should know to better understand this program.
Entrepreneurship is a key driver of economic growth
Entrepreneurship has become a global trend and a priority for countries around the world, because it drives economic development: it brings energy and creativity to existing industries and services, creates new markets, and generates more jobs. Governments in developed economies all have policies that encourage entrepreneurship. Beyond engaging their own citizens, major countries such as the UK, Canada, France, Switzerland, and Portugal have also introduced immigration pathways for entrepreneurs to attract foreign talent.
One entrepreneur immigration program that has attracted strong interest and participation from investors worldwide is Canada’s Start-up Visa (SUV) Program, which offers a direct route to Canadian permanent residence (PR) for the whole family. Unlike passive investment in development projects or real estate, the SUV program involves investors in building a startup. That requires a clear understanding of the startup journey: forming an idea, incorporating a company, the stages of growth, investment organizations, and more.
For clients interested in immigration to Canada through the SUV program, IMM Group outlines below what a startup is and what you should know about building one.
1. What is a startup?
The term “startup” refers to a young company in the early stages of building its business. Startups are founded to develop or improve a new product, service, or technology not yet available on the market, in order to meet an unmet need or solve a problem in the market.
Startups usually have little or no revenue, yet they require heavy, sustained spending on research and product development. As a result, startups are often backed by startup support programs and investors.
2. The stages of a startup
Idea
At this stage, the startup is simply a new, creative idea that may meet a need or solve a problem for which the market has no solution yet.
Minimum Viable Product (MVP)
After conducting market research and confirming that the need is real and remains unmet, the startup begins building a minimum viable product or service (MVP) and testing it in the market. The main goal of the MVP is to see how the market receives the solution. The startup must then stay flexible and adapt quickly to user feedback, making appropriate adjustments to refine its product.
Product–market fit
This stage is decisive for a startup’s success: it is where the startup tests how well its product matches market demand. Once a startup achieves product–market fit, its product or service gains acceptance, the company grows quickly, and customer feedback is positive.
Go-to-market
Achieving product–market fit means the startup’s solution is what the target market needs. The next step is to determine the best strategy for bringing the product or service to customers and converting as many people as possible within that potential market. The goal is to define marketing and sales channels, pricing, and customer retention strategies. With the right go-to-market strategy, a startup can generate revenue, scale, and become profitable.
Growth
At this stage, the startup scales up and may move into new segments and geographic markets. It will need more capital, but because it has proven its performance, raising funds becomes easier than before.
3. Startup investors and support organizations
Raising capital and finding expert mentorship to bring a business idea to life are among the most important, and most challenging, steps for any startup. To ensure that breakthrough ideas are viable, Canada’s Start-up Visa (SUV) Program requires applicants to obtain a letter of support for their business idea from one of three types of designated organizations: a venture capital fund, an angel investor group, or a business incubator. These are also the three most common types of organizations that startups turn to today for funding and support.
The right type of investor or support organization for a startup depends on the company’s specific stage of development and its reasons for seeking investment capital.
Venture capital funds
Venture capital funds (VC funds) are professional firms with large pools of capital that invest in startups in exchange for equity, targeting companies with fast-growth potential and the prospect of high profitability in the future. These funds tend to be more pragmatic than other types of investors, so they mainly invest once a startup’s growth potential has been proven in the market. The trade-off is that they write much larger checks, and the funds take an active role in the company’s growth by participating in strategic management and key business decisions.
Angel investors
Angel investors are wealthy individuals or experienced entrepreneurs who invest their own capital in startups. They tend to accept more risk than other investors, so they often invest at the idea or seed stage, in ideas that match their interests, experience, and expertise, in exchange for an ownership stake in the company. Compared with venture capital funds, angel investors may invest smaller amounts but with a longer time horizon, and they typically ask for less control over the business.
Business incubators
A business incubator is an organization or support program designed to foster the growth of early-stage startups, when a startup has only a rough idea and no clear business model. Incubators “nurture” startups as they turn ideas into viable products, providing resources such as office space, mentorship opportunities, business training programs, community networking events, and advice from industry experts.
Throughout the incubation process, startups attend classes and training sessions that push them to refine their ideas and learn how to communicate their plans to customers and potential investors. Incubators usually charge fees rather than taking equity in the startups they support.
If you are interested in Canadian business immigration through the SUV program, please contact IMM Group or leave your details below. Our experienced advisors will provide detailed guidance and help assess your application’s likelihood of success. We are committed to keeping your personal data confidential and will use the information you provide only to advise on your family’s case.
IMM Group
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