Defining a startup and what that means for an entrepreneur
Startup is a term that is hard to define and that’s because most people don’t agree on a single definition, not even among entrepreneurs. I’ve read about many different criteria for classifying a company as a startup and not a small business, but the truth is that the real difference is merely the image. Startup is a brand, it’s sexier and feels premium, while small business, well, it’s just a smaller-sized version of a business, which doesn’t sound quite as appealing, right? It’s superficial, really.
A startup can be defined by its growth as proposed by Paul Graham and Daniel Tenner or by its business model as suggested by Steve Blank. It can also be a feeling, a culture or a state of mind, or any of these definitions by various founders. Let’s look at other possible definitions and analyze the different points of view:
Company that sells users(‘s data)
A startup uses data provided by the users themselves to make money by selling it to the highest bidder, which is usually advertisers and other times bigger companies (as some may argue is the case of Facebook’s latest string of acquisitions).
Company without business model that is in search of monetization
A startup creates a great product for free and then struggles to incorporate a business model into its core, generally through advertising. Startups like this can be extremely successful without making a cent simply because of high adoption rates and incredible growth. In the end, they still need money either from its customers or from its investors.
Company that is small and (possibly) in the tech industry
A startup is simply a small business, more often than not operating in the tech industry. In this case, any business can be a startup, even a blog, a freelancer, a consulting service, or a local shop.
Company that creates a market through innovation
A startup launches a product and also a category. It creates a new market and drives demand for its product. In this case, the startup is an innovator and its product is first-to-market; investors will take a gamble and competitors may wait by the sidelines before jumping in for a piece of the pie.
Company with one product that grows into a business
A startup is built around one product which needs to scale by building a business around itself. Sometimes, these are single-feature products; think of mobile applications. These apps are built purely focused on the product offering and either eventually make money which forces them to shift focus towards business or eventually realize that they need to make money to keep going and then shift their focus towards business.
Company that makes no profit and is VC-backed
A startup offers a product or service at lower pricing than the market and often operates on a loss but is covered by venture capital. Startups like this are usually in a rush for land grab, competing for market share rather than revenue.
Startups are evolving and so is their definition
Startups should be defined by their ability to fail, their ability to grow beyond expectations. To challenge and overcome paradigms. A startup is a modern day David fighting the Goliath of today’s corporations. That’s the way I like to see it. How does that affect us entrepreneurs? We have the opportunity, and even the duty, to shape this definition. We are leading the charge of innovation and building the future of business. Be part and be proud.
What does a startup mean for you?