The term “startup” has become a buzzword just like “big data” and “cloud“. The term is now used to associate innovation and agility with young organizations. Even in Wikipedia there is no clear definition to be found.
I also think that a startup can be a starting company from any industry, not just technology-related ones, and the status is also not depending on its estimated potential for growth.
It’s also not a venture capital thing. A startup can develop absolutely organically without venture capital and without an accelerator. Things such as a burn rate is not to be used in proper value or growth estimation and risk management. Also it is most definitely not related to the average age of the founders and the team.
What does it really mean to be a startup?
Startup is an early, fragile and immature stage of a newly founded company. People who are used to old economy, process and complex approval activities, love the idea of “just doing something”. Many people seem to understand a startup as an agile organization which gets ideas to market in a very fast pace. That might be happening but this is not what defines a startup.
There is no differentiator in 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 they have 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 startup has established a sustainable business model, has a product or service, partners and major clients, it will lose its status as startup. They might be still called that by others but it would be wrong to market the company as being a startup.
A curious conversation
One time in London, I overheard a conversation of two business individuals, who introduced themselves and their employer along with that. One asked the other person, “when has your company been founded?” and the other person replied, “We’re a startup and have been founded nine years ago.”
Rightfully so the first person is highly irritated, hearing that statement. He proceeds to validate that by asking, “You’re a nine year old startup?!” and the other person was seemingly irritated as well when he came to realize, they lost their startup status a long time ago and just clung on that for the 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 with moving into your third or fourth or fifth office building, you’re just no startup company anymore.
And that’s ok! 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 be still around in two or three years. That’s not vendor risk management, that’s merely common sense. You’d do the exact same thing when buying home appliances.
I would love to hear feedback and know your opinion about this subject. How do you understand what a startup is? Any thoughts are welcome. Just drop a line below in the comment section. Many thanks for reading!
Photo credit: Sebastiaan ter Burg