The word startup has been widely used, usually to describe companies that are on the receiving end of millions of euros/dollars in funding from all sorts of investors looking for an exit. As a part of the local startup community, we were recently part of a discussion that touched upon the subject of what are startups, and there were a lot of different definitions offered, based on each participant’s point of view.
That prompted us to do a bit of research on the subject after the meeting, and to our surprise, we discovered that there’s no clear definition of a startup in global terms as well.
According to Merriam-Webster, start-up means “the act or an instance of setting in operation or motion”. The Oxford dictionary ads an additional element stating that a startup is also “A newly established business”. So based on this, to be considered a startup one would need to be a newly established company that is starting its business operation. But this definition seems a bit too narrow.
Taking into consideration the business lifecycle of a company, from idea generation to maturity, being a startup is simply one of the stages of development of a company; to be exact, it is usually the second stage of the lifecycle, characterized by launching the company towards the realization of the business idea.
Although this is consistent with the previous definition, we can also agree that not every newly established micro/small company can be considered a startup company. So what is the necessary component that differentiates startups from every other newly established micro/small enterprise?
There are some other available definitions out there that could shed some light on this question. An especially interesting one is from Steve Blank:
“A startup is a temporary organization used to search for a repeatable and scalable business model.”
This corresponds to the business lifecycle, and implies that a company should one day become a successful business (mature company), or be abandoned if it fails to do so.
Another definition is the one provided by Paul Graham (Y Combinator):
“STARTUP=GROWTH i.e. A startup is a company designed to grow fast.”
Taking these two definitions into consideration, it could be said that being a startup is defined by the vision and goals of the founders of the company, their attitude, ambition and abilities for growth and scaling the business at a fast pace. So being a newly established company does not make it a startup, and it doesn’t need to be involved in technology, or supported by a venture fund. The only thing that matters is growth, and how fast the company manages to find a scalable business model.
To finish, we would leave you with a final definition of startups from Eric Ries (author of The Lean Startup), which illuminates the challenges of the environment in which startups operate and the amount of resilience and persistence founders need to possess in order to be able to grow from an idea to a mature company.
“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”