San Diego Startup Week: What is a Startup?
According to the Oxford English Dictionary, perhaps better known these days as Oxforddictionaries.com, a startup is defined as “a newly established business.”
To purists, perhaps, this might be true. But language evolves, and definitions change. One reason language evolves is because nuances come to light that need to be reconciled. Because language is a model overlaid on reality, the ultimate truth is not in the language, but in what the language is trying to represent. These days, the startup community is changing the dictionary-based definition of a startup. From the experts, for example:
Steve Blank: A startup is an organization formed to search for a repeatable and scalable business model.
Eric Ries: A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
Paul Graham: A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth.
Mark Suster offers a more nuanced view, believing an overemphasis on growth hurts some startups. Some business models simply take longer to grow than others, yet still fit in the startup category. Some are even, perhaps, destined to make a “dent in a smaller world.” (I might put it as a smaller dent in the same world.) The fact remains that even in Mark’s qualified view, a startup is not the same as a “small business.”
As startup financing evolves, my belief is that Mark will be proven correct. Venture capitalists will only finance a small fraction of companies that seek to be worth billions, and the rest will finance growth through investment capital not dependent on the black swan “big win.” In the end, the distinction of what makes a startup is not what level of growth one aspires to, but rather, whether one truly, in the heart of hearts, has ambitions for growth at all.
A restaurant on Main Street that wishes to expand their business across the West is more similar to a new military uniform manufacturer seeking scale through global defense contracts than it is to a nearby PR agency, drycleaner, or a family-owned electronics repair shop on the same block.
The financing, mentoring, legal advice, real-estate needs and so on, are fundamentally different for fast-growth companies than traditional small businesses. So are the … Next Page »