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San Diego Startup Week: What is a Startup?

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disrupt markets or at least bring significant change to the status quo. A startup ceases being a startup when that has been achieved, the market has limited the potential size, or the founder has given up seeking that, due to any number of factors.

Small business owners might object to the notion, but most small business owners prefer to stay small. Fast growth causes problems that most small business owners do not want to deal with. Why? Because they can have a satisfying lifestyle without stressful growth. Sane people wish for nothing more. You are happy when you align your objectives with your lifestyle. BOOM!

The broader implications are immense. Only recently did some federal and state officials recognize the difference between startups aiming to be big companies, and small businesses founded by people who are simply trying to provide for their family.

The latter is nothing to sneeze at; Small businesses are the backbone of the American economy. In my opinion, we should do whatever we can to support the efforts of entrepreneurs seeking to improve their lives by starting their own businesses. That is at least half of the American Dream.

But small businesses do not create scalable businesses. On the other hand, scalable businesses create small businesses. When TakeLessons, a local scalable startup, grows from 10 employees to 100 in two years, it requires larger and better office space, and spends more for office supplies, accounting, legal fees, and so on.

Scalable startups are important because they increase demand for other products and services. Their growth induces other businesses to grow. Even large businesses cannot impact local businesses in this way. They increase or decrease demands on the local economy on the margin. New growth companies create new demand for legal, accounting, office supplies, design, architecture, food, drink and so on.

“Small Business” is not a pejorative term. Neither is “lifestyle business.” These are incredibly important to the San Diego economy. But the resources required for small business and scalable businesses are vastly different. The City of San Diego, as well as civic organizations, the media, and others need to recognize the difference to align and move with the changes we hope to bring about by fostering a startup culture in San Diego.

Startups are not small versions of big companies or big versions of small businesses. So there are all sorts of things we need to do differently.

Through the Downtown San Diego Partnership and the San Diego Regional Economic Development Corp., San Diego’s city government has made great strides in supporting the local startup scene, without perhaps, overtly recognizing the fundamental policy differences required by its varied constituencies. Nevertheless, the City of San Diego should consciously recognize the differences between small business and startups. Recommendations:

—Evaluate current programs through the startup lens. Are they designed for startups or small businesses?

—Engage with startup founders to determine if they might benefit from modifications to existing programs.

—If it is determined startups can be assisted, market to them as startups, not small businesses. City services will not successfully recruit startup founders by referring to them as small businesses.

—Brainstorm new programs, including zoning, tax incentives, and real estate spaces that might attract startups, which would create a demand for retail and other small businesses.

San Diego skyline

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