Once the entrepreneur has developed a business idea and is ready to plunge into the process of organizational growth, comes the riskiest stage of them all that will determine whether the company will survive or not: the startup phase. In the startup stage, the enterprise is born and becomes a legal entity. In most cases, the company has already started to serve its first set of customers. The single and greatest challenge in the phase is obtaining and managing the appropriate amount of funds needed to establish the firm and the market. This paper examines why the startup phase is the most critical stage of organizational growth and the scarcity challenge that organizations encounter during the phase.
It is commonly believed that the startup stage has the potential of affecting the enterprise several years down the line. Any simple mistake during this phase can influence the development and survival of a company probably the reason 25% of startup corporations do not get to see their fifth birthday. A lot of trial and error is involved trying to craft or design commodities according to the wants and preferences of consumers. However, the greatest challenge as mentioned earlier is acquiring and managing resources to sustain the continued existence of the firm (Stayton & Mangematin, 2016).
According to Salamzadeh & Kawamorita Kesim (2015), the company must strive not to burn out the existing funds and to capture the interests of potential investors to secure a source of funding. Moreover, during the startup stage, banks are not an option for money nor are public institutions or venture capitalists. Very few investors take an interest in a corporation in the startup phase. Running out of resources becomes a constant threat for the organization. Additionally, the firm has to deploy the scarce funds and employees to deliver the needs of consumers. Hence, it is essential for the entrepreneur to continuously revise the budget to identify any cash requirements beforehand and adapt to the unpredictable circumstances (Gupta, Guha & Krishnaswami, 2013).
References
Gupta, P. D., Guha, S., & Krishnaswami, S. S. (2013). Firm growth and its determinants. Journal of Innovation and Entrepreneurship, 2(1), 15.
Salamzadeh, A., & Kawamorita Kesim, H. (2015). Startup Companies: Life Cycle and Challenges. London: Routledge.
Stayton, J., & Mangematin, V. (2016). Startup time, innovation and organizational emergence: A study of USA-based international technology ventures. Journal of International Entrepreneurship, 14(3), 373-409.
