What is a startup?
The dictionary defines it as “the action or process of setting something in motion.”
OK. That’s not very clear.
So is Uber, which has a $US40 billion valuation but is only five years old, a startup?
Is that mum and pop shop that just opened on your block a startup?
There’s no definition any two entrepreneurs or investors agree on. Most say a startup is determined by its age, growth, revenue, profitability or stability.
TechCrunch writer Alex Wilhelm proposes a new rule he dubs “50-100-500” to help determine what’s a startup and what isn’t:
“If your company has, or is any of the following, you have to hang up your Startup Uniform, and realise that you are just another technology company either hunting for or actively avoiding an IPO,” Wilhelm writes. “$US50 million revenue run rate (forward 12 months); 100 or more employees; Worth more than $US500 million, on paper or otherwise.”
The problem with that formula is that every mum and pop shop on your block that’s been open for generations would then be considered a startup.
So, others define a startup more loosely. Stanford professor Steve Blank, for example, describes it as “an organisation formed to search for a repeatable and scalable business model.”
Warby Parker co-CEO Neil Blumenthal has a similar definition: “A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed,” he told Forbes’ Natalie Robehmed.
Perhaps the most precise definition of a startup is that there isn’t one. Being a startup, a lot of founders believe, is a state of mind. It’s not a word that’s restricted by the number of years a company has been in business, or the amount of revenue a business pulls in.
Jan Koum, the cofounder of $US19 billion WhatsApp, says a startup is a feeling.
“I think [a startup is] not connected not with time,” he told journalist Nastya Chernikova (Google translated from Russian). “They say that age — it’s not the number, but how it feels. For example, I do not feel like I’m 38. [Our] company is five years old but we are moving quickly and make decisions quickly, we build products, so we are still a startup. We do not have meetings, conferences etc.”
Another entrepreneur stated it more bluntly. Homejoy CEO Adora Cheung tells Forbes, “[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.”
Personally, I think a startup is all those things rolled into one. The concise definition I’d use is “a few-year-old tech company that could still easily fail.” It’s more subjective than objective.
Having observed and written about a bunch of startups, I’d say this longer definition is pretty accurate too:
A startup is an emotional roller coaster that can either result in massive failure or success, after which one’s bank account total may either drastically increase or decrease. The person behind a startup is a founder, an often very bright, somewhat crazy person who finds a normal 9-5 job dull and is deluded into believing he or she can change the world by working tirelessly in front of a computer screen. The relentless work has been known to shave a few years off a founder’s life while adding premature grey hairs, but it can be very rewarding both emotionally and financially for those who pursue it.