What Is a Start-Up? Definition, Starting One, Example

What Is a Start-Up?

By Jeremy Bowman – Updated Dec 14, 2025 at 8:13 PM

Key Points

Start-ups, often tech-focused, require substantial funding to grow, typically sourced from VC firms.
Investing in start-ups is difficult without VC connections; IPOs offer general investors entry.
Mistral AI, a generative AI start-up, raised $113M pre-product highlighting market enthusiasm.

Companies go through several stages of the business life cycle, and almost all major companies begin as start-ups. Although the term is relatively new, the concept has been the same -- even for businesses founded in the 1800s. These days, most investors think of a start-up as a tech company, but it can apply to a new company in any industry.

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Welcome We Are Open sign in the window of a start-up business. — Image source: Getty Images.

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Business Model

A plan outlining how a company creates, delivers, and captures value; it describes the core aspects of its operations and revenue generation.

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It helps if the founders have a prototype of the product, whether a digital product, like an app, or a real-world product. Similarly, the founders are more likely to have success raising capital if they have specific relevant experience that will help the new company succeed, such as a high-end position at a big tech company. It also helps if the business model, such as the subscription software model, has been proven.

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Since launching over the summer, Mistral AI has introduced a beta model called Frontier AI, aiming to create a family of open models. Investors in Mistral AI are likely eyeing the monster valuation that privately held ChatGPT-creator OpenAI just reached at $90 billion, a sign that investors are clearly bullish on the trend.

That's evidence that a well-positioned start-up can be hugely successful before it goes public.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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