No, you aren’t building a startup. But that’s ok.

I recently assisted the “pitch day” of a renowned incubator, presenting its most promising seeds to a bustling floor of BAs and VCs flocking in the busy conference room of a splendid downtown hotel.

As is customary, several founders had to pitch their startup for a few minutes to get a chance at landing an interview with investors and, if all goes right, getting funded.

I thus sat there, taking notes as entrepreneurs successively presented the change they wished to deliver to the world for nearly an hour before realizing what was bugging me: almost none of these projects were startups.

My favorite definition of a startup is from Steve Blank:

“A startup is a temporary organization in search of a business model scalable and replicable.”

To achieve “launch pad” status and deliver on this definition, I’ll add a third factor: founders’ iteration capabilities (I’ll cover this point in following posts). This triad is essential to grasp which challenges the team will face in building the aspiring Unicorn.

It is equally important to consider the implications of these ambitions, in terms of risk-taking, necessary skills (including permeability to stress), and personal goals, which are different for every type of company.

Several huge corporations are still labelled as “startups”, carrying the title since their early days when then obeyed a set of criteria that has been rapidly shrinking ever since: a birthing company, delivering highly scalable tech products, founded by a young team, burning little cash, with overly ambitious goals. It sounded cliché, but still statistically depicted the reality better than the current usage of the term, progressively stripped of each of these attributes until all that remains is “a birthing company”.

This whole misunderstanding has a second, more insidious cause. For the past two decades, the term startup has been heavily associated with the word Entrepreneur, from which stems one of the greatest syllogisms of our time. If a startup is created by an Entrepreneur, then all Entrepreneurs create startups. Right? Well, think again.

Heres Oxford’s dictionary’s definition of Entrepreneur:

“NOUN: A person who sets up a business or businesses, taking on financial risks in the hope of profit.”

All companies are founded by Entrepreneurs. Steve Jobs was indeed an Entrepreneur, but so was Henry Ford, and I have yet to hear anyone call Ford Motor Co. a “startup”.

Founders, let’s take a quick quizz

• When pitching, do you get an audible gasp from your audience whenever the 3-year projections slide drops? (“he’ll never reach those numbers; is he insane?”)
• Are you psychologically ready to dump your project in the trash and start over from scratch until you run out of cash?
• …operationally ready to do so?
• …several times?
• Do you get headaches when thinking how understaffed you are to deliver the next version of your product that should’ve shipped yesterday?
• Do you have plans to extend internationally within the next 24 months, regardless of the current stage of your company?
• Have you already figured out how you could meet a sudden tenfold or hundredfold demand for your product/service ? (because you’re convinced it will imminently happen)
• …is your market big enough for that situation to happen?
• Would you know what to do with 10 additional talents if you could magically hire them within a month ?

If you answered “no” to any of these questions, I am sorry to break it out to you: you aren’t building a startup. You’re building a company, and you’re probably at the “Small-Medium Enterprise”stage in this process.

The good news is you’re still a bold, fierce Entrepreneur, as there exists no ranking in the virtues of Entrepreneurship. The bad news is you’re probably evolving in an environment that, despite kind intentions, might in the long run damage your business and yourself.

Blindly labelling “startup” any new company is a counterproductive attitude that we need to rapidly shake off before the magic veil goes away and we all wake up hungover from this crazy “everyone is changing the world” party.

This futile habit sets a tremendous amount of pressure on founders, especially those who have no intention of scaling out of their minds, as they’re just aiming to build great products for their customers over years of dedicated work.

Here’s a story we’ve witnessed time and again: the founders of a so-called “startup” set overly ambitious goals from peer-pressure and advice from the ecosystem as a whole (incubators, VCs), then miss those targets because they’re not in the right mindset. When they inevitably get convinced to raise funds, despite not needing nor wanting to — as they’re usually the quickest to profitability— they spend months on the road trying to convince unreceptive investors that will constantly challenge them on aspects they’re not comfortable with, because their respective vision of success diverge. If and when they manage to convince investors — which won’t usually be the cream of the crop — they embark on a journey of doubt and conflict with their board, because they can’t see the elephant in the room: neither side wanted this.

This process distracts the ecosystem from people that are truly looking to build startups. Teams with high iteration capabilities will run out of cash before reaching their full potential because the money went to projects that didn’t need it (as much as them, at least). Good VCs won’t invest in disguised SMEs, and the energy spent added to the frustration of founders isn’t worth it. Startups have lot to learn from traditional companies, and vice-versa, but that doesn’t mean we must constantly mistake one for the other.

It is thus paramount for founders to be clear on what they’re trying to achieve, and be straightforward with their counterparts. If they don’t, their team, processes, goals, and investors will be a constant reminder that they should’ve set boundaries when they still could. Does that mean they shouldn’t take advantage of all the perks they get with that label? Of course not! But for them, the question must be: would I rather build an exceptional SME or a terrible startup?

If you’re an actual European startup looking to close a Seed/Series A stage, make sure to hit us at apply@indigoblue.vc