What is a startup?

By | February 12, 2016

What is a startup? The term gets thrown around a lot these days. It sounds hip, exciting and cool. It suggests technology, risk, and most of all huge amounts of money. Barely a week goes by that there isn’t news of a ‘startup’ being snapped up for millions of dollars (usually by Facebook or Google). But to me it’s not clear what makes a startup a startup, and what distinguishes it from a plain old-fashioned business.

Is any new business a startup? Or just any new business made by a hipster? Someone under 30? Something that seems a bit risky? Something based on technology? It all seems a bit woolly to me.

I sometimes feels easier to think about things that a startup is not: someone setting up a business cleaning windows does not feel like a startup, someone selling handmade knitwear does not feel like a startup, someone putting together a roving theatre troupe also does not feel like a startup.

But how do we define what a startup is, rather than what it isn’t?

The only definition that I’ve found satisfies me is this one: that it is a business that is built on huge growth of its customers and users. Actually making a profit takes a back seat. Growth is an end in itself. Growth brings excitement, hype and investment. If you’ve got investor money coming in, who cares if you actually make a profit?

Grow now, profit later is the mantra of the start-up.

Startups don’t have to be technology-based, but it does make it easier. The growth definition certainly seems to do well at describing the current cohort of exciting startups done good: Instagram, Twitter, Swiftkey, Whatsapp, Facebook… they all focussed entirely on gaining users. Indeed, Twitter has been showing very publicly the difficulties a startup can get into when customer growth slows or stops altogether.

As a final thought: Although I find myself noticing startups in the news a lot recently, it actually looks like use of the term ‘startup’ peaked in around 2002, just after the dot com bubble burst – perhaps ‘startup’ isn’t quite as hip and exciting as I had thought…