Startups are hot! They are all over the news. Daily my linkedin feed is filled with news of startups either getting funded or getting acquired for big money.
People whether in business, technology or even students in colleges are super excited to start their own startups or work for one of the hottest startups.
I too started 2 ventures (read startups as it sounds more fashionable) in last decade but it never occurred to me earlier that why some ventures are called startups while majority of the businesses that are started every year does not fit into startup definition.
Every nook and corner of the countries around the world, we have shops, retail stores, service centers which offers products and services to masses. Every year millions of such businesses are opened and majority of them are closed with in few years.
Some of these businesses do well and are able to continue operations for long. But still they remain small with low revenues and reach.
Similarly we have big business houses like Tata’s, Birla or IT Giants like TCS, Infosys which started small but over course of years (read decades) became big with billions of dollars of revenue and share holder values.
Why is it that these small or big businesses are not called startups?
What characteristics does a business have which makes it a startup?
is it related to following or any other thing?
- Size of team
- Profits, revenues
- Age of team
According to Paul Graham, Co-founder of YCombinator
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.” http://www.paulgraham.com/growth.html
So if a venture is not designed to grow and scale fast than it is not a startup like say barber shop because it is limited by the market or vision of the owner.
Similarly a big company can not be classified as startup as it is already big and there is very less scope to grow further or fast in given market or time frame.
So if you really want to fashion your venture as startup than you really need to understand growth and scalability and what it takes to achieve it with all the constraints of time, money and other resources.
For an in depth study on definition of startups and growth visit the article by Paul Graham