San Diego Startup Week: What is a Startup?
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requirements for success. For the former to achieve their ambitions, the founders must hire a team, including sales and marketing, delegate authority, hire experts, outsource parts of their businesses, seek partnerships, and so on. Profits (if there are any) go back into the business. The small business founders (this is not a criticism) typically maintain tight reins on their businesses both in terms of hiring and engaging outside influences. The owner seeks profits as soon as possible, and is not concerned with putting the profits back into the business.
The point is that fluffy articles that have great fun pondering the question, “what is a startup?” are completely ignorant of the implications. So let’s see if we can set this straight. All of the above definitions would agree that though startups start small, “small businesses” are not the same thing as startups. The definition of a startup has less to do with how long you’ve been in business than with the scale of business you attempt to achieve.
Equally contentious is the question of when a startup ceases being a startup. Again, it isn’t defined directly by how long it’s been in business. Dropbox has been in business for seven years. It’s received about $1 billion in funding (including debt financing). It needs to get a lot bigger to provide a return to its investors. It’s still a startup.
While there’s a lot of gray area, there are three ways to define the end of a startup: 1) Through an equity event, such as acquisition or IPO. The investors get their money back, maybe more. 2) The market has spoken, and the company in its current state will not continue to grow. It has essentially morphed into a small or medium-sized “lifestyle” business. No equity event is on the horizon. 3) The company folds.
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