Quiz Page 12 of 99 (PART TWO)

1. When a business invests in assets that are able to generate revenue or appreciate in value, then it can be said to be establishing wealth via return on investments (ROI). That is, a return on the preliminary investment.

One such scenario could involve a real estate startup that has invested in properties that generate substantial income—think rental apartments or commercial buildings. If such assets are well-managed, the startup can begin to accrue stable rental income while simultaneously boosting property value.

Or a startup could look at investing in financial assets (stocks or bonds). By means of a meticulous and well-managed portfolio of financial assets, the business would earn from such investments and generate further capital for its investors.

Real-world example:

Raisin is a fintech startup from Germany that has established itself in various European countries. Customers can invest in fixed-term deposits via several European banks using Raisin’s platform and provides higher interest rates in comparison to what’s on offer in their home countries.

The company receives a commission fee on the deposits it facilitates, and investors receive ROI. With more than €200 million in funding, Raisin has enabled its customers to obtain over €35 billion in deposits. It’s no wonder that this finance-based company is considered one of the fastest-growing fintech startups in Europe.

2. Every startup aims to establish wealth and increase revenue. The first involves building long-term value and sustainable growth, the second involves making significant revenue over a short period. A startup entrepreneur needs to focus on the development of a robust business model that aims to deliver on the tangible needs of the market. This same model must be scaled over time. There will be investment in research and development, the establishment of a durable brand, and the creation of a dedicated customer base. In the long term, such a startup is generating sustainable revenue and profits, ultimately adding value for both investors and shareholders.

Profit should never be pursued at the expense of long-term growth and value creation. A startup with its eyes on the future aims to establish a stable foundation and invests in its growth while succeeding in defining the best methods to increase revenue streams and slice through costs.

The key is to create and maintain a flexible, and adaptive approach to the business model, and stay focused on the customer.

Real-world example:

In 1999, Jack Ma founded the Chinese e-commerce company, Alibaba Group. The business-to-business online platform focused on connecting buyers worldwide with Chinese manufacturers. Eventually, the company expanded into retail e-commerce, cloud computing, and digital payments.

Alibaba has boosted profits by using an array of strategies: leveraging technology to improve efficiency, reaching out into new markets, and providing a wide selection of products at competitive prices.
Consider Alibaba’s retail platform Taobao. It has been able to draw a massive customer base by offering an extensive selection of products at low prices. It uses data analytics to track consumer behaviour and personalize recommendations—both of which help boost sales.

By expanding into the Southeast Asian and Indian markets via partnerships and investments with local companies, Alibaba has tapped into new customers bases and increased its revenue streams. As of 2021, Alibaba’s revenue was over $100 billion, and its market capitalization was over $600 billion, making it one of the most valuable companies in the world.

3. A startup looking to challenge the status quo of current markets will push innovation forward by launching fresh and innovative ideas inherent in a disruptive product. This product sets out to promote growth and establish new opportunities by essentially modifying the way in which consumers and businesses engage with a specific industry.

A startup might leverage new technologies or business models that enables the company to provide products or services that stand out from what is presently offered on the market. This sets up the opportunity for a competitive edge which draws in new customers and to acquire market share.

At the heart of this entire process is innovation—that burning entrepreneurial desire to create something new and innovative, hoping to confront existing norms. The entrepreneur needs to think differently about the market, pushing the competition to adapt or risk being outpaced.

One invaluable advantage is that startups tend to be more flexible than bigger, establish companies. This means they respond faster to variations in the market and can adapt their products or services accordingly.

Real-world example:

Tesla is a well-known company making waves by designing and manufacturing electric vehicles, solar products, and energy storage systems. Its electric vehicles are not only environmentally friendly, but aspire to luxury and boast high-performance ensuring that it was capable of disrupting the automotive industry.

That industry had relied on fossil fuels for a long time and Tesla’s electronic vehicles (EVs) have proven to be an innovative game changer. How? Not only are its operating costs lower, but it prides itself in its premium performance while reducing emissions. Strategically placed charging stations mean that owners of a Tesla EV need not run out of power while travelling long distances.

With its energy storage systems, Tesla has enabled private homes and businesses to generate and store their own energy. These products have created disruption within the energy market by giving consumers more control over how they use their energy and how much they need to rely on fossil fuels.