The word startup has many definitions. Here are some of them
f you’ve ever wondered what exactly a startup is, don’t sweat it because you’re not alone. There are so many definitions and connotations for the word, we thought we’d compile them all in one place for you.
A startup is… a new business venture.
One of the most well-known definitions for the word comes from Eric Reis, the creator of the ‘Lean Startup Methodology.’ He said: “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”
Many can agree that startups are companies in the early stages of their development. The Merriam-Webster dictionary defines startup companies as fledgling business enterprises.
While some suggest that a company can be called a startup if it is under three years old, Paul Graham, founder of seed accelerator Y Combinator, told Forbes that a company which is five years old can still be a startup, but one that’s ten years old “would start to be a stretch.”
In the early stages, startups may be entirely bootstrapped by founding members of the team or seek the help of external funding sources. In short, they can be described as companies that are newly created and in the process of finding their business model.
When our founder, Sissel Hansen, launched Startup Guide in 2014, she bootstrapped the project. At four years old, we are technically over the three-year mark, yet we still consider ourselves to be a startup as we continue to strive towards scaling up and becoming economically sustainable.
A startup is… the opposite of a corporation.
Some define startups as the antithesis to corporations. As businesses that operate on a much smaller scale with comparatively fewer employees, common characteristics of startup culture include having less structure and more of a demand for a flexible and proactive team.
Employees from startups may find that they exceed their contracted hours of work and survive on a less than desirable salary, which is why startups require their team to fall in love with their mission.
“In my experience, a startup is a job you cannot quit, that does not pay, and which you cannot live without,” Sacha Nitsetska, Founder and CEO of Mentorforward told Startups.co.
While corporations may offer more definitive job titles, job security and higher wages, a recent study showed that millennials are ditching grad jobs in favour of startup culture.
While corporations have long been associated with nine-to-five working hours, commuting and smart dress, the term ‘startup’ has also become laden with connotation. Words such as ‘cool’ and ‘agile’ are bandied about across social media as quintessential portrayals of startup culture.
When people think of a startup, they may picture young people in jeans set against a backdrop of a modern, minimalist office space, playing table football or swilling coffee from branded mugs. While this may be a flattering image for some, it serves more to undermine the work that is actually involved in working for a business of this kind.
Startups also aren’t just reserved for young people. “Founders come in all ages, from all backgrounds,” 70-year-old entrepreneur of Workforce First Aid and Safety, Mark Winokur, told Startups.co.
A startup is… a numbers game.
A ‘50,100 and 500’ rule can be used to assess startup status, according to editor in chief of Crunchbase and former TechCrunch writer, Alex Wilhelm.
Alex says that if your company has, or is any of the following, you have to come to terms with the fact that you’re probably just another tech company either hunting for or actively avoiding an IPO: “$50 million revenue run rate (forward 12 months), 100 or more employees, worth more than $500 million."
While this formula may be useful as a basis, it isn’t always entirely appropriate. When seeking to define startups with numbers, the waters can get a little murky. Smartphone Maker, Xiaomi, for example, was valued at $45 billion within four years of its conception – an impressive amount over Alex’s rule, yet was still referred to as a startup.
A startup is.... interested in growth and/or disruption.
One aspect that most can agree on is that startups desire to grow; many of them do not want to stay startups forever. They want to expand, and fast.
Programmer, investor and writer, Paul Graham, states on his website: “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup … The only essential thing is growth. Everything else we associate with startups follows from growth.”
And this is how we can differentiate from startups and any other small business. While some companies of smaller size may wish to stay that way, startups are always looking to break new ground and expand into larger territory.
The startup Planday, which is featured in our Startup Guide Copenhagen book, is an apt example of this. What was once an idea generated in a backyard in Copenhagen became an ambitious plan to become the world leader in online management solutions.
Endorsed financially by Creandum, the Nordic region’s leading VC and a prime investor in Spotify and Vivino, Planday’s management platform has expanded throughout the Nordics, the UK, the US and Germany.
Swedish music streaming service Spotify began as a startup before disrupting the music industry over a decade ago and monetizing on the digital movement. Spotify founders Martin Lorentzon and Daniel Ek spent several years trying to develop a sustainable revenue model in an industry initially deemed impossible to crack. By trying to provide a free music service, they struggled to secure monetary support from investors.
After the music industry fell under siege to piracy, labels began to see digital file sharing as a threat to their streams of revenue. But by demonstrating that the music industry could generate revenue in the same way that it had been doing so from radio, Spotify was able to turn music labels into allies rather than enemies.
After a shaky funding process sprawled out over several years, Spotify was able to come up with a sustainable business model and finally launched their service in 2008.
A startup is… a problem-solver.
Yet another way of defining a startup is that it is rooted in invention. Startups identify a problem and seek to solve it with ingenuity.
“A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed,” Neil Blumenthal, co-CEO of Warby Parker, told Forbes. One common aspect associated with startups is their willingness to experiment.
InFarm, a company featured in our Startup Guide Berlin Vol. 4 book which offers on-demand farming services, are a glowing example of this. After finding a solution to growing their own produce indoors during a cold February in Berlin, InFarm didn’t stop there. Believing that food production should be close to the consumer, they then constructed a mobile, indoor farm from a 1955 Airstream trailer where plants could grow on shelves.
Through constant experimentation, startups can be defined by their mission to challenge and enhance the world around us, often in the most unpredictable ways. A startup isn’t simply an idea, but a vehicle for change.
A startup is… “a state of mind.”
Adora Cheung, CEO of Homejoy, told Forbes that: “A startup is a state of mind. It’s when people join your company and are still making the explicit decision to forgo stability in exchange for the promise of tremendous growth and the excitement of making immediate impact.”
To neatly define the term ‘startup’ is thus an insurmountable task. It cannot be quantified by numbers, nor condensed into a single definition. What is the consensus between founders, however, is that startups are more than just a business venture.
Tied to independent stories and desires, they require teams who believe in and support the company’s mission. They grow and expand depending upon human capability to innovate.
Chris Kane, Cofounder and CEO of Munch Money, might have hit it right on the nose when he told Startup.co that a startup is the “largest group of rebels, rule-breakers and unconventional thinkers that you can find, convince and inspire to create breakthrough change in the world.”
Main photo: Unsplash/Rawpixel
*This article was originally published on October 17th, 2018 and updated on December 11th, 2018.