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How Do You Define “Startup”?
by Allen Stern on January 16th, 2008
Help me out here… how do you define a "startup"? Everyday I get emails, phone calls, inquiries about writing about x or y startup. I have conversations via voice or in person daily about some startup. But one thing that I’ve been wondering about is how is a startup defined.
Some thought starters:
- Is it based on funding? If a company has funding of any size, can they still be considered a startup? Angel round = startup, Series A = not a startup?
- Is it based on level of "live"? If they are in pre-alpha, alpha or beta, are they automatically a startup?
- Is it based on employee count? If the company has more than x employees – Erick on TC called a 14 person company yesterday "tiny"
- Is it based on time? If the company is in business a year or more, no longer a startup?
- Is it based on revenue? If the company generates over x amount in the first year, no longer a startup?
Are these companies startups in your opinion?
- FeedBurner (before the Google acquisition)
- Mahalo
- Netvibes
- Wordpress (part of Auttomatic)
- FederatedMedia
- Meebo
- Compete
- Quantcast
- Dogster
- PlentyOfFish
- Ning
- ConceptShare
- Jangl
- Tumblr
- TripIt
- Wetpaint
It seems like companies want to hang on to their startup as long as possible. So how would you define startup?
I define a startup as a company that has – or intends on -exchanging investment capital for equity and is still counting this capital to sustain its existence. In other words, it’s funded somehow – founders, founders working for free, angels, VCs – and it’s not yet cash flow positive to a degree needed to sustain its existence or growth.
Most of these Web 2.0 science projects are nothing more than digital art. And VC’s are the collectors.
To me, “startup” has a bit of a marketing feel to it lately. A few years ago, very few companies referred to themselves as startups. Nowadays, everyone is a startup.
I work for a startup myself, but we are quickly building out staff and I think we’ll definitely move into the “grownup” company realm shortly.
A friend interviewed with a company that was proud to call themselves a startup. They had strong revenue and were still private (no investments). My friend decided to go and work for a more established (Fortune 500 actually) company. This proud “startup” changed their story and began explaining how non-startup they were.
That questions gets me confused still. Is it enough that there’s a web application? So customizing Joomla or forums for community sites wouldn’t count, right?
It gets even more twisted when you break it down into location… what makes a company an Israeli startup, an Indian startup, a Filipino startup? Is it ownership? The developers? The market?
When I look up bootstrapping online, articles show that you just have one guy who has money and he outsources the development to a developing country and TADA! He has his own new web app – I’m not too keen on calling that a web startup, but there IS a web product involved.
BTW, thanks for getting this started Allen. Weird that I can’t find anything definitive. I’d like to follow your approach for our site for Philippine web startups, is that okay?
Defining a startup is tricky business, as the other posts have noted. While most Web 2.0 companies are startups, there are many other factors that define non-web companies as startups, as well.
While funding, employee numbers, revenue and age of CEO are all interesting elements of a companies profile, it really comes down to how long has that company been offering products or services…
So what is PropertyQube.com?
We’re live, we have a polished site that sells nothing, and has minimal ad revenue, a blossoming community, and continually improvements…
As a developer for PQ, we feel like a start up, the idea, and the work is almost a year old. we’ve gone through a view solid designs, and we keep chruning out product like a start up.
But here’s the question, I never see us ending that… at what point do we cease to become a startup?
Hey, and check us out!
To qualify as a bonafide startup today, your company:
- Must have a cool name that does not describe what your company does. Example: Jangl.
- Cannot have a business model or an interest in developing one. Example: Twitter.
- Must raise as much cash as its founders can find from VCs and institutional investors. Example: Ning.
- Must have a CEO who knows that leadership is dead and that it’s all about doing what the “community” wants. Example: Mahalo.
- Should have at least one founder who went to Stanford. Example: Meembo.
- Must throw at least one huge launch party for a new product. Example: Netvibes.
- Must allow pets in the office. Example: Dogster.
Conversely, a startup cannot:
- Have a CEO over the age of 40. Example: Federated Media.
- Be based outside of Silicon Valley. Example: Wetpaint.
- Offer services that aren’t supported by advertising and that people actually pay for. Example: ConceptShare.
- Be profitable. Example: PlentyOfFish.
This is a definitive answer. Please close comments for this post.
damn. you are like the better uncov and i know they followed you.
I can’t close comments though – my editor won’t allow it – I checked.
Hey Allen,
I like the I-know-it-when-I-see-it defintion. :)
Speaking of interesting startups…I had a great talk today with Mark Pincus, the founder of Zynga Game Network.
Check it out:
http://www.techconfidential.com/behind-the-money/blog/angel-investor/qa-with-zynga-game-network-fou.php
Looking forward to seeing you F2F at Alan Brody’s ibreakfast Web 2.0 event on the 31st!
All the best,
Mary Kathleen Flynn
Senior Editor
The Deal & Tech Confidential
mflynn@thedeal.com
The company I work for has about 70-80 staff – but we’re a new startup.
We’ve just started trading recently and are expanding rapidly, yet we have the cool office culture, great benefits, open forums for discussions, flexible working hours.
Props to anybody that guesses who we are. European based : )
so tell us the startup :) im betting its either uk or germany based.
I think startup means a company that is less than 12 months old or maybe 12 months from launch of their product.
My business is a startup, I run a 1 man web development shop but from April I will have been in business for a year and want to move the business on so I feel startup at that stage would harm the business.
Thank you Darren! So your definition is time based.
Here’s the definition from a cool startup … hm… a company trying to remain a startup :-)
thank you! so they go by biz plan – guess that means twitter will always be a startup (sorry couldn’t resist!)
As renowned Supreme Court justice Potter Stewart said regarding pornography, “It is hard to define, but I know it when I see it.” And such is the case with your list. Unfortunately, I don’t know all of the companies well enough to apply my rule.
So I will take a stabI think if any of the below is true, generally (though not absolutely) you are a startup.
The key question is how mature is the company towards its business plan. For example, Federated Media has presumably executed the full scope of its business plan, i.e. they are selling ads, which I presume, was their plan. Twitter on the other hand has not even figured out a revenue model. That is clearly a startup. This does not work in biotech, where companies go public way before they sell anything. But in the internet space I think the “where are you in your plan” rule is pretty good.
Thank you Hank!
if 14 is tiny, then im barely here (staff of one tho i do have a variety of personalities – works well during tax time)
lol @ Drama – cap the CEO age at 29, you’ve got one year left!!!
Allen – I took exception to the tiny company of 14 thing too. :) Did you know that MOST of US companies (like 90%) are made up of 10 or fewer employees? Less than 1% (or something) have more than 1000 and like .0000001% have more than 10,000. True stats!
I’ve decided: the “startup” is more about mentality than it is about tangible metrics.
http://www.drama20show.com/2008/01/16/what-is-a-startup/
I’d say that funding def. moves the company out of startup-land. And Tripit and Dogster are startups in your list above.