What is a Startup According to the Leading People in the Industry
If you were wondering how many startups exist around the world at the moment, there’s the only correct answer: No one actually knows. Each day a new idea becomes a venture, while some other seemed-to-be-great-idea fails. It’s a continuous and global process. Silicon Valley, known as a home to numerous startups counts more than 24.000 of them. On the other side of the world, there are 26 co-working spaces and 950 startups in the city of Tel Aviv alone! Those companies were founded in different sectors: public, private, non-governmental and also by big international companies, like Google or Facebook. The reason why it is not easy to count the total amount of startups is simple: There is no clear definition of what a startup actually is because the requirements of profit, revenue or employment numbers are not clearly defined. What differentiates a startup from the opening of a small business? When does a business that was a clear startup become something more? Even with all the unidentified parameters, there are some main points that define a startup. Here are some of my thoughts on the topic, followed by what startup-industry leaders say.
A startup is, by default, a young company and, what’s more, very often lead by young people. I say often, but definitely not exclusively. There are startups that are founded by experienced and skilled professionals. A successful startup requires a lot of energy and enthusiasm; young and fresh ideas. The youth of the overall company and the energetic atmosphere of the startup team is what gives a startup its status. Although even with all of the zest and youth, the success of the young company is not guaranteed. Which brings us to the next key point:
If you come up with a really good idea and start your own business, no one will shake your hand on the first day and applaud you, “Bravo, this is exactly what the world needs!”. People do need new things, but, at the same time, so many things have already been invented. No one can guarantee that something never seen before will be well accepted and successful. There’s always a layer of uncertainty in a startup company, unsure if the idea will be ‘a hero or a zero,’ in the words of Lori Greiner, a famous startup investor from the show Shark Tank. On the topic on new:
Startups must offer something new- a new product, new service or even a new business model. Whether it’s a self-tying sneaker, a new social network or an interactive travel planner – it gives us something that no one has ever tried out before. That’s why it needs to pass through many stages of evaluation:
Whether it’s a newly started business or a company that exists for a couple of years – a startup is constantly being valued by investors, as well as by the users. When an entrepreneur convinces an investor that there is a profitable reason for funding, the time comes to convince the users that investor has made a clever choice. In other words, a startup must go through many cycles of valuation until it can rightfully prove to investors and users that the market needs it.
Therefore, the startup really needs to meet some kind of need. In order to be approved by consumers, a startup has to provide an answer or solve a problem. The startup can also make some processes simpler or some paths shorter. Generally, the goal of the new company should be to make some aspect of life easier.
And who doesn’t like “easier life”? If users find a new venture useful, it will be quickly recognized and it will grow very rapidly! That might also be the main difference between traditional small businesses and startups. Due to the fact that small businesses usually have local character, they are not usually interested or able to spread quickly and widely. Startups, on the other hand, are orientated to the mass market. That’s why startups usually use:
The most common way startups manage to come closer to the vast number of potential users is with the help of internet and personal gadgets. It gives the opportunity, even for a one-man company, to work day-in-day-out! While the hardworking founder sleeps, the user might be awake, looking specifically for his cool, new product. What’s more interesting, this digital approach is a much more effective and affordable way of getting the startup’s name out there than any other traditional marketing method. All right, it is affordable, but it is not free:
Entrepreneurs don’t initially need loads of of money to launch their idea. However, if they don’t have enough resources to get through all of the rough phases on their own or the founders simply don’t want to invest on their own, they try to secure support through a number of investment rounds. Support may come from business angels, investment organisations, governments, banks, insurance companies, institutes etc. In return, investors get equity or the partners agree on other terms. Besides for finances, these new relationships may consider other forms of support as well such as legal or professional advice from experts. Since many of the startup founders are inexperienced and young, this can be a win-win combination!
After all of this, I will agree with the conclusion of the many others who explored the concept of the startup: It is difficult to define it. However, I tried to point out the common denominators in these young companies and to take us one step closer to understanding the startup phenomena.A startup company also doesn’t necessarily need to check every point on this list. It shouldn’t be overlooked that each company has its own DNA and is unique in its own way.
The list of startup attributes isn’t finished here. I asked some experts in the field what their thoughts on the topic were, and here’s what they said:
“I agree with the Steve Blank‘s definition of a Startup: ‘A startup is an organization formed to search for a repeatable and scalable business model.’ It’s less about the age of the company but much more about if it’s an innovative business model or not. As an example, we at Wortspiel.ch are a young company but I wouldn’t consider ourselves a startup, our business model isn’t new – we give advice and consulting for payment. This business model is probably thousands of years old.”
Stefan Vetter, CEO & Co-Founder at Wortspiel.ch – a Google Adwords Consulting Company.
“A young venture with an innovative service or product, which is growing quickly and has a scalable structure”
“For me a startup is one who shows me their product or service before anyone else. But, more seriously, a startup is a young, fast-growing company.”
“At its core, my view a startup is a bunch of crazy guys who are questioning the status quo and are willing to do everything to drive the incumbents, who are notably dominating the space, out of business. In a more generic way it is everyone who recently has set sail to build a new business.”
“Creating something from nothing”
“A startup is a company that hasn’t yet reached maturity. It is still prototyping and/or fundraising. It doesn’t have a large staff, and company culture is still forming.”
“A startup is the roller coaster of the business world. A super challenging, volatile, and high risk venture that leverages technology to leave an impact on the world.”
“I’m a fan of Paul Graham’s definition of a startup (founder of YC) – a startup is a company designed to scale very quickly.”
“A young, not established company, with an innovative (internet-based) business idea, which was founded with little capital, the intention of growing quickly and a very scalable business model.”
“A startup in its essence a not-yet-established endeavour that is started by one or more courageous people (or as a subsidiary of a company) with uncertainty but also with the hope of finding a new, innovative and disruptive business model, which is sustainable, scalable and profitable. Unfortunately, sometimes it’s an idea that is not thoroughly thought out, where the founders try to be better than an already existing copy of a copy.”
“Any company that’s under 12 years old is a startup company”
“A startup is an organization established to build highly scalable products and business models, mainly in tech industry”
Oliver Flückinger, Lecturer @ University of Zurich, Switzerland
“Quickly growing, high investment opportunity, scalable product with global possibilities”