What is a startup?

What is a startup? Within my four years of working in the startups industry and community, this may be the question I have been asked the most. However, being completely honest, I don’t believe there is an exact answer.

Going back to the very basics, a ‘startup’ is an idea for a business to which you then start up, the implication of ‘start’ symbolises the beginning of a journey and process. Simply put a startup is a new business, at the beginning and very early stages of its life.

When I asked some of the community their thoughts, the theme of the beginning and new was very common, as Ian Richards, Founder of Work to Live Financial Planning suggested: “A company starting from 0.” And Marc Labbett, an Advisor at M&A agreed: “A concept in its infancy gathering momentum.”

The definition when Googled, provides a number of explanations and although described in slightly different ways, they all suggest the same thing. A young/early company aimed to develop a product or service in the initial stages of its operations. Investopedia states: “The term startup refers to a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand. These companies generally start with high costs and limited revenue, which is why they look for capital from a variety of sources such as venture capitalists.”

Whilst most agree that a startup is definitely at the beginning stages of a business, it doesn’t always mean it will progress further, as sadly there is a lot of risk and potential failure that may happen. Thomas Constant, Founder and CEO of BeoBia, stated: “An early-stage innovative business concept that can scale quickly and fail quickly.”

A startup is more than just a business being born, it is an idea that someone believes in and is essentially an entrepreneur's baby. Creating a startup takes someone who has a passion and a drive to ensure their idea comes to life to make a difference - or a positive impact.

Chris Caffrey, Founder of Legacy Club and close partner of Startups Magazine said: “A startup is the manifestation of an idea that is going to solve a problem for its customers. It takes over your entire life, and even your sleep. It's the most stressful and challenging thing you will do in business. Mentally, physically and financially draining, but it will be the most rewarding experience of your life if you get it right. The smallest victories feel like you climbed to the summit of Everest.”

Forbes can be seen to define startups as businesses that want to disrupt industries and change the world and do it all at scale. “Startup founders dream of giving society something it needs but hasn’t created yet - generating eye-popping valuations that lead to an initial public offering (IPO) and an astronomical return on investment.”

Dr Murray Ellender, Practising GP and CEO of eConsult believes it is about addressing a problem: “Problem-solving sits at the very heart of being a startup. Startup organisations are driven by individuals – or a group of peoples – burning desires to innovate to problem solve a very genuine challenge they see within their immediate vicinity.  

“There’s often a very evidence-based mindset of innovators founding these organisations. You start with the hypothesis and then test it, and test it again until you find something that will impact or even fix what you consider to be broken. Working in a nimble, agile and flexible manner, with the ability to move fast and react to a quickly changing market, they can try to scale the solution. For example, healthcare entrepreneurs might try to solve the problems that they face day to day when caring for patients, and then scale them.”

However, looking at it directly another way to define a startup is when you ask, ‘When is a startup no longer a startup?’

“It stops being a startup when people don’t feel as though what they are doing has an impact,” said Russell D’Souza, Co-Founder of ticket search engine SeatGeek.

Although some people do protest that there are metrics on when a business should no longer be deemed a startup, a lot of founders and entrepreneurs disagree and believe it is more a cultural aspect and of course your passion and drive that makes you a startup.

Michael Watts Co-founder and CEO of Blüm Health commented that: “A startup consists of all that determination and risk that you take before you get your first opportunity. And given that luck is where opportunity meets determination, I'd say a startup is an SME before its lucky break.”

To me there are three key elements to consider when trying to define if a business is still a startup or not; how long the company has been running, the size of the company (number of staff) and the amount of revenue the business is turning over. And there isn’t a black and white criterion for any of these that states you are now no longer a startup.

For me a startup is a combination of the three, for example, I have come across startups that are five years old, but still only have three team members and have only made minimal revenue. Contrastingly, we have interviewed businesses that are less than two years old and have made millions. It comes back to the saying; it’s not a one size fits all system.

A lot of the time it is the monetary value and earnings that people define and look at more closely. This was slightly echoed in VC Edward Goodchild’s comment: “A startup turns an idea into a business and is usually funded by the founder until there is sufficient traction so that capital can then be raised from external parties if required.”

Another key theme when looking into what a startup is defined as, and asking around the community was the use of the word ‘innovation’. Giuseppe Milazzo, Founder of Contapp said: “When I think of a startup, I think of innovation. My definition of a startup is a young company founded to develop a unique product/service, looking to disrupt industries and change the world.  In my experience as a bootstrapped Solopreneur, a startup operates with little resources and lower budgets. Often started by 1 person or a very small group of people that share the same vision.  It takes courage, persistence and wearing a lot of hats as a Startup Founder. You don't know what a startup is like until you're running/working in one. It's a rollercoaster of emotions but the knowledge and lessons you learn are invaluable. You either succeed as a startup or you gain more knowledge than every job you've ever had, combined.”

Rabah Chendouh, CEO and Founder of SARL Wadifny described it as: “An innovative company is a company whose material and human investment focuses on the creation of innovations, not only technological to adapt to the market.”

When you think of the word startup, does the word Hustle ever come to mind? For us at Startups Magazine, we have created the ‘Hustle’ Awards to portray and celebrate the startups community, as a lot of people do link these together. Jules Robertson, Co-founder of Tally Market added: “A startup is a relatively newly formed company that is still trying to find its product-market fit. It can and does change its strategy and product at a pace to respond to customer needs and feedback. It is really just a bunch of hustlers.”

Essentially, a ‘startup’ means something different to different people. For some it is their life and soul, to others, it is a huge success, but for some, it is something keeping them up at night and unfortunately something that may not have worked out. One thing with startups is there is no guarantee for success, but that is the excitement in a way – the risk and the trying. Mila Brazzi Creative Director at Projects summed up a startup by comparing it to play dough. “Messy, agile and limited only by the imagination of the creators. Always at risk of drying up by using its limited resources poorly, a successful startup relies on its people to roll up their sleeves, to be passionate to co-create - turning a 2D idea into a self-supporting, 3D animation over time.”