Once a startup. Not always a startup.
When is the right time for a startup to admit it’s a grown up?
Like many who live in San Francisco or New York, I’ve definitely been fascinated with the startup culture and success stories of startups such as Facebook, Foursquare, Square, Twitter, etc. and I hope to run one of my own some day. However, the more I hear the word ‘startup’, the more confused I get about what it truly stands for.
What qualifies as a startup?
I wonder if Apple ever called itself a startup in it’s early years? Or even Microsoft & Hewlett Packard? Is every Etsy vendor the founder of a startup? When P&G invests in a new team to work on a new brand under the umbrella company, should it be called a startup? Should the food-truck at the corner call themselves a startup? When a new coffee-shop opens up in Brooklyn, is it a startup?
The word ‘startup’ is one of the most over used and abused terms of today. I think many people tend to use that term as a general umbrella for one or all of the following statements:
We are a young company & a have a small close-knit team.
We just closed a round of funding from one of the many known VC firms.
We are strapped for cash but have some really cool perks like flexi-hours and catered food.
We have a cool culture and don’t follow stereotypical corporate practices.
We are building some really cool next-gen stuff that will disrupt an industry.
We are trying this out and it could fail, but we have the funding that allows us to fail fast and pivot if we absolutely need to.
Excuse the over-generalization, but I think my assumption is atleast 80% accurate. Again, this is no dig at any startup, but the word ‘startup’ itself and the associated meaning it has been burdened with.
Sometimes, I get the feeling that some companies try to use the word ‘startup’ as a mask for their incompetency to generate revenue and build a robust business model. Of course there are exceptions such as Tumblr (which got acquired for $1B by Yahoo). They had a great vision for a product that users love for sure, but they got purely lucky with the acquisition and all stakeholders got their money’s worth.
When should a startup grow up and accept itself as a valid business?
I hope to have this answer someday when I have my own startup that I grow into a business - but I think this is a valid question for every founder to think about whenever they call their venture a ‘startup’.
At the risk of sounding naive, here is my current thinking of when you should consider your a startup a business:
- Your startup is atleast 3+ years old
- You have more than 50 full-time employees.
- Your startups income per year can sustain the itself (even if there are zero/minimal profits)
- You have between 500k-1m users for your product (of course this is heavily based on the product)
- You are acquired by a bigger established company.
The above factors will continue evolving as I gain more insight and understanding in the world of startups. In the meanwhile, I leave you to think about a few well-known entities: what you would call them - startups or companies?
Is Foursquare still a startup?
Launched in Mar 2009. 4 years old. 120 employees. 30 million users. ~$112 million in funding.
Is Square still a startup?
Launched in Feb 2010. 3 years old. 400 employees. 3 million users. ~$341 million in funding. Has acquired 2 companies.
Is GroupMe still a startup?
Launched in May 2010. 3 years old. 19 employees. 4.6 million users. ~$11.5 million in funding. Acquired by Skype in August 2011. Skype is owned by Microsoft.
Is Tumblr still a startup?
Launched in Feb 2007. 6 years old. 175 employees. 34 million users. ~$125 million in funding. Acquired by Yahoo in May 2013.
All startups have to grow up to be successful businesses some day. The question is ‘when?’
Seems like some people are trying to answer this question on Quora: http://www.quora.com/When-does-a-startup-become-a-startup?