At what point is a startup no longer a 'startup'


9

Is it revenue, profit, number of staff, does it even matter?

If you've been at the coal face for a good 4 to 5 years do potential investors want to hear that you're still in startup mode - whatever that might be?

Definitions

asked Nov 5 '09 at 13:44
Blank
User952
46 points
  • For meta discussion is what is the scope of the board if we don't have a shared definition of what a start-up is and when it isn't anymore. – Joseph Barisonzi 8 years ago

18 Answers


9

"Start up" can be a state of mind. Ok, I am about to start ranting...

Some of the other posts suggest that lack of profitability is a requirement to still be a start up. I adamantly disagree. A start up could be immediately profitable and often ought to be. It is a pathetic failure that so many start ups have found profitability to be so unimportant. I hate that funding (self or outside) and profitability are often viewed as being mutually exclusive.

Some of the other posts seem to think that you are a start up until you "exit" in some fashion (acquisition, IPO, or ick failure). This is another faulty way of thinking. Companies are meant to live, not die, be eaten, or be turned into something real (as if they don't count already).

Start ups forever I say! Who is with me?

answered Mar 28 '11 at 06:28
Blank
Kenneth Vogt
2,917 points
  • Rant on! I absolutely agree with you here! :) The idea of ignoring profit model to get huge worked for a few lottery winners, but for most just ensured their rapid destruction when the bubble burst. – Matt 8 years ago

7

I'm not aware of any formal definition of "startup". If one exists, I'd love to hear about it.

I think about a "startup" in this way:

  • The term applies to high-growth companies and companies with intentions / aspirations / hopes of high growth.
  • If such a company has negative cash flow and lives off venture capital, then it is a startup no matter how large or old it is. For example Twitter is still a startup IMHO, Facebook was a startup for a long time.
  • If such a company has a positive cash flow, then it is a startup until it reaches 100 employees or 4 years of doing business, whichever comes first.

If a company has been doing something for 4-5 years and is profitable, then it is not a "startup" IMHO -- it's a successful company.

A perhaps more useful way of defining startup could be:

  • Startup: Any company before product / market fit, and any company with product / market fit which is expanding and financing this expansion with equity.
  • Growth company: Any company which has product / market fit, and finances itself by other means than selling equity (i.e. organic growth, loans).
If youve been at the coal face for a good 4 to 5 years do potential investors want to hear that your still in startup mode

Almost certainly not. They might not dislike the company being called a startup, but they would want it to be in a "scale up mode" or "transitioning to mainstream market" mode or something similar.
answered Nov 5 '09 at 14:54
Blank
Jesper Mortensen
15,292 points
  • Amidst the rants and "it depends", I think your startup/growth definitions are bang on. – Alphadogg 8 years ago

5

A quote from Dharmesh -- the founder of the OnStartups blog:

  1. Growth: If you're still growing by 50%+ more a year, you might be a startup.
  2. If you're not yet profitable (because you're investing in growth), you might be a startup.
  3. If you're still doing stupid-crazy things on a regular basis, you might be a startup.
  4. If you're still even thinking about raising additional capital, you might be a startup.
answered Oct 12 '11 at 12:52
Blank
Hartley Brody
1,317 points

3

Funny you should mention that. I'm in to my ninth year in a software company in which I was the first employee. We just hit about 30 employees. So far it still feels like a startup. I'm also wondering when I should stop saying 'I work for a startup'.

We still have no employee handbook. The few rules we have are just passed by email and word of mouth. That's a characteristic of an early startup.

But really, any U.S. based business ought to have at least a small handbook before employee number 1, so that's not a certain sign of the end of startup.

In past startups I've noticed that hiring a full time HR is a pretty certain sign that the startup phase has ended. That's why I volunteered to participate in recruiting and resume screening. At some point we'll need a real HR person, but I want to put that off as long as possible.

The other sure sign you're not in a startup anymore is when the founders leave without a big payoff. That goes double if your startup is VC funded and the founders are fired and replaced with a 20 something fraternity brother with a new MBA.

The best sign that startup is over is when your company has a big liquidity event. The early people will leave to self-actualize. Those who remain now work at a 'real' company.

answered Jun 18 '12 at 06:48
Blank
Jim In Texas
228 points

3

It took Amazon what, almost seven years before it turned a profit? Could you really consider them to still be a start-up even in 2001? For most others though, I would consider the break even point to be that line in the sand. After all, you can be making millions in revenue, but it doesn't really matter unless you can actually convert it to profit at some point.

I would think the major indicator, however, would be whether or not the company could still go on if the founder(s) left. In the beginning the start-up is essentially just the founders; if it's strong enough to survive without them then they have succeeded in building an actual business.

answered Oct 12 '11 at 12:45
Blank
Alex
1,156 points

3

There is no singular definition or point in time when you go from "startup" to "not".

As someone else posted, Dharmesh's questions are good indicated of when you might (or, might not) be a startup, but it is still not an absolute test.

In the end, does it really matter?

To me, "start-up" is a non-specific term to indicate a company is still in that fate-unknown roller-coaster stage of growth.

You could say it is no longer a startup when the founders are no longer worrying about being replaced by their investors, running out of capital, or stalling the growth of the company.

answered Oct 13 '11 at 06:05
Blank
Brian Karas
3,407 points

2

It's not number of employees that make the difference, it's the stability and proven business model. Once you can reliably estimate next years income, and are paying people out of profits not investment, it's not a startup.

For your three year example, the question wouldn't be number of employees but is that number of employees profitable -- if the company made enough to pay 15 employees, but they are still expanding and investors are still putting in money, then it's still a startup. If they are expanding but the expansion is coming from profits and there's no more investment money rolling in, it's not a startup, it's a profitable small business.

answered Jun 18 '12 at 12:53
Blank
Jmoreno
121 points

2

There is no agreed upon list of conditions. There are many answers to this, not all overlap.

To me, a company leaves the startup status once:

  1. The training wheels comes off - metaphorically speaking, it does not rely on outside Venture Capital (or owners self financing) to survive.
  2. The conditions mentioned in item #1 have been a constant for a period of time that satisfies the founders & investors indicating the company became "a grown up".

BTW: Getting funded isn't the time to remove the "Startup" status. It's almost always just the beginning and a critical milestone in the life of a serious startup - the removal of the "Bootstrap" status.

answered Mar 27 '11 at 11:30
Blank
Ron M.
4,224 points

1

"startup" has more historically meant an entity that has raised money, hired some people, and then is trying to scale the idea out and build a self-sustaining business. I would say the average lifetime of the "startup" stage is around 3 years for a typical company.

But, there is no finite definition, it mostly means a new business on shaky ground where the odds of failure are still greater than the odds of success.

answered Mar 28 '11 at 06:07
Blank
Brian Karas
3,407 points

1

Well I don't think it's time, revenue maybe, profit maybe.

I think really it's when you are generally perceived as the incumbent rather than the outsider.

answered Oct 12 '11 at 14:26
Blank
Robin Vessey
8,394 points

1

The start-up stage is over when you find a consistent and repeatable way of generating revenue - profit or no profit. Groupon is past start-up. So is Facebook.

answered Oct 13 '11 at 05:22
Blank
Allan Topher
11 points

0

I've observed it to be when:

  1. The foozball table goes.
  2. There's a real training program.
  3. Products switch from cool to useful
  4. The company stops buying you lunch
  5. People remember they have lives outside work.

This may seem to be tongue-in-cheek, but I've already had two people post "3 of out 5" and 5 out of five" on a (closed) duplicate of this question!

And it actually it really does reflect my experiences!

answered Jun 19 '12 at 11:30
Blank
Michael Durrant
227 points

0

there are various stages in company growth and there is much written about it on the internet or textbooks. opinions and stages differ slightly from author to author.
I personally like to think that the goal of startup is to prove the business concept and start bringing money into the bank. this means that there are customers who actually pay for the product/service and there is minimum viable product. once the startup achieves the goal its not necessarily startup anymore.

answered Nov 5 '09 at 14:26
Blank
Ondrobaco
131 points

0

I almost think it is on your frame of mind.

A startup has a very particular culture, as there is so much energy and innovation taking place in a flat hierarchy.

So, even though you may be making a profit you may still be a startup, until you are either acquired or have been around for a while, and become more mature, and the culture of the business will have become mature.

answered Nov 5 '09 at 14:41
Blank
James Black
2,642 points

0

I think its no longer a startup once you are profitable and the profit is sustainable over a set amount of time. Hiring one employee as another poster said really doesn't show growth.

You're no longer a startup when you can convince others to invest (aka purchasing) your product.

answered Jul 12 '11 at 23:06
Blank
User9968
229 points

0

There is a very clear definition of a startup stage - it's everything that happens until your business enters maintenance mode.

Therefore, you are no longer a startup when:

  1. Products have been developed in a way to satisfy demands of most customers
  2. Daily company operations are working smoothly
  3. Your sales and revenue are growing
  4. The world won't collapse if you leave for a vacation

As for the time..it can take anywhere between six months and eternity.

Hope this helps.

Cheers,
Pete

answered Jul 12 '11 at 23:34
Blank
Pvukovic
561 points

0

Interesting question. I'd love to hear what more people have to say.

I went to work at an internet startup that was already about eight years old and had about 70 or 80 employees. The company wasn't profitable at the time, but could have been, if they hadn't invested so much of the revenue back into the company's growth. Our CEO and president considered us a startup until the day they sold the company.

So to me, a company is a startup until one of the following happens:

  • failure
  • getting sold to another company
  • adopting a long-term business plan for profitability rather than only focusing on growth
answered Mar 28 '11 at 06:08
Blank
Gesher
61 points

-2

When the hire their first employee.

answered Mar 27 '11 at 12:08
Blank
Rob Gordon
441 points
  • Sorry, but I totally disagree with this. I would say its a "project" and not a "startup" UNTIL you hire your first employee. – Brian Karas 8 years ago
  • The semantics of "start up", "project" and "bootstrap" among others are an interesting way of parsing out this question. – Kenneth Vogt 8 years ago

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Definitions