How do you define a Startup?
"A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed", Neil Blumenthal CEO of Warby Parker.
"A commercial business." – Definition of a company
"An organization or economic system where goods and services are exchanged for one another or for money" – Definition of a business
If you aren't serving anyone with your product, does that mean you don't have a startup?
My personal definition is that a startup is a company optimizing for being at least an order of magnitude bigger than it currently is.
This addresses the two main points of contention about what constitutes a startup which are:
Both of those can be answered by considering whether the company is more interested in executing at their current size, or at 10x their current size.
A locally-owned coffee shop could maybe one day become the next Starbucks, but right now they're just focusing on making their one location a success. They're more interested in their current size than they are in the possibility of being 10x that size in the future. So they're not a startup.
Facebook has so many users at this point that it's virtually impossible for them to grow another 10x. Even if they do, it would take so long that they'd be better off focusing on their current size. They're a big business, not a startup.
My company (Less Annoying CRM) has transitioned from startup to small business, so I've seen this first hand. There was a time where we were growing >2x each year. At that growth rate, you're not really worrying about the business at its current size. You're thinking about what it will be like when it's much larger. How do you scale hiring? Customer service? Do you need a bigger office even though you're not even close to filling the current one, etc.
Now we're growing at ~28% YoY (we're at $3.2 MM ARR and 17 employees if that matters). That's still pretty good growth, but it's not so fast that things are changing radically from year to year. Sure, we'll be a bit bigger next year than we are right now, but the company won't be fundamentally different. So now I don't think we're really a startup anymore. We're just a really ambitious small business because we're more worried about executing at our current size, and we'll worry about being 10x bigger when/if that ever happens.
This is a very good way of putting it.
Do you mind me asking if your slowed (but still very respectable) growth was on purpose (eg as a result of a conscious decision on your part to focus less on growth and more on profitability/other things) or just something that happened naturally?
It depends on how you look at it.
It's certainly not the case that we intentionally slowed down growth. We tried to keep up that old pace, but we couldn't. Something I didn't appreciate when we were growing quickly was that growth is subjected to gravity. There's always this force pulling your growth down. You can fight against that, but it's almost a given that whatever your growth is this year, it'll be lower next year (I mean this in the sense of relative % growth, not absolute $ growth). Each year we add more new revenue than the year before, but it's a smaller percent of our starting revenue.
But while we didn't intentionally slow down our growth, we did intentionally impose constraints on ourselves that we knew would hurt growth. For example, it was very important to me from the very beginning to never raise money (I saw VC money destroy the last startup I worked at). And with a name like "Less Annoying CRM", we we're sort of pre-committed to not use a lot of annoying sales and marketing tactics other companies use. So while we wanted to grow faster, we weren't willing to do some of the things required to make it happen.
Also, now that the growth has slowed down, I realize that it was for the best. When you're small, doubling year-over-year is doable. Like, a two person team can reasonably hire two more people in a year without stretching too much. But the idea of doubling in a year at our current size is terrifying. Going from 17 people to 34 in 12 months would be way beyond my capabilities as a CEO, and I think it'd probably hurt a lot of what makes us special right now. So while it wasn't an intentional decision, maybe it should have been.
Makes sense, thanks!
"A temporary organization in search of a repeatable business model." Steve Blank coined this definition.
I like this definition by Erick Ries. "A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty"
Second this one. ☝️
I go back and forth on the extreme uncertainty part. Say you have one startup that paves the way for fast followers. Are the fast followers startups? I would still say yes in the classic sense. (there is some uncertainty)
But like what @Ettore says, starting up a wedding photography or web design shop isn't inherently risky or carries a ton of extreme uncertainty because it's a fairly common need that many people before us already proved.
A startup is a company that finds an innovative way to disrupt an industry that comes with an exorbitant amount of risk.
Personally, my definition of a startup includes the ability to scale. One of my pet peeves is when people come to me and tell me they started a wedding photography startup or a web design startup. These are service based companies. You can make good money, but it still scales with hours invested and I would not consider them startups.
For whatever reason, people are much quicker to call themselves startup founders as opposed to business owners. I'm down with calling things startups as long as they can scale reasonably. Furthermore, including scaling in the definition accurately excludes massive companies as they are unlikely to scale several multiples within a couple of years.
I don't know but it bugs me how many companies are called "Startups"... I don't feel like our MRR biz is a startup. Feels more like a small internet business thanks to our slow, methodical MoM linear growth.
I think the definition should be centered around scaling & how quickly it can scale.
But maybe I should just stop letting it bug me :)
bugs me too lol :)