The term “startup” has become a buzzword, just like “big data” and “cloud.” It is now used to associate innovation and agility with young organizations. Even in Wikipedia, there is no clear definition. I also think that a startup can be a company from any industry, not just technology-related ones, and its status does not depend on its estimated potential for growth.
It’s also not a venture capital thing. A startup can develop organically without venture capital and an accelerator. Burn rates are not to be used in proper value or growth estimation and risk management. Also, they are most definitely not related to the average age of the founders and the team.
What does it mean to be a startup?
A startup is an early, fragile, and immature stage of a newly founded company. People who are used to the old economy, processes, and complex approval activities love the idea of “just doing something.” Many people seem to understand a startup as an agile organization that gets ideas to market very quickly. That might be happening, but this is not what defines the term.
There is no differentiator in the time and age of the company, and neither is it defined by the size of the team or organization. A company is no longer a startup once it has established one or more sustainable business models. A startup is the mode of survival of a newly founded company when money comes in via different channels every month and when you can’t predict growth for even six months.
When a new company has established a sustainable business model and has a product or service, partners, and major clients, it will lose its status as a startup. They might still be called that by others, but it would be wrong to market the company as being a startup.
A curious conversation
Once in London, I overheard a conversation between two business individuals who introduced themselves and their employers. One asked the other person, “When has your company been founded?” The other person replied, “We’re a startup and were founded nine years ago.”
Rightfully so, the first person is highly irritated upon hearing that statement. He verifies that by asking, “You’re a nine-year-old startup?!” The other person was also seemingly irritated when he realized they had lost their startup status long ago and just clung to that for formal introductions when meeting business partners and prospects.
The flavor of a toasted brand
I get it. It’s like selling yourself and your company as fresh and agile in your marketing. Use some “big data” and compute it “in the cloud” with your hip “startup” company. That’s like a 60-year-old showing up in a tee and basecap with a skateboard. If you’re just done moving into your third, fourth, or fifth office building, you’re no startup company anymore.
And that’s okay! I love working with established companies with experienced staff just as much. Be proud of being mature and stable. Your clients will love the long-lasting relationships with suppliers that will still be around in two or three years. That’s not vendor risk management; that’s merely common sense. You’d do the same thing when buying home appliances.
Photo credit: Sebastiaan ter Burg
