What is a Startup?

Posted on January 16, 2008
Filed Under Culture & Technology |

My efriend Allen Stern over at Center Networks asked something interesting today: how do you define “startup”? It’s a good question. Not only because everybody seems to have his or her own “startup” these days and there’s a whole pop culture symbology built around the concept of the “startup,” but because we throw the term around so much that it has almost become as nebulous as the “Web 2.0″ moniker.

Allen suggests some possible criteria:

* Is it based on funding? If a company has funding of any size, can they still be considered a startup? Angel round = startup, Series A = not a startup?
* Is it based on level of “live”? If they are in pre-alpha, alpha or beta, are they automatically a startup?
* Is it based on employee count? If the company has more than x employees - Erick on TC called a 14 person company yesterday “tiny”
* Is it based on time? If the company is in business a year or more, no longer a startup?
* Is it based on revenue? If the company generates over x amount in the first year, no longer a startup?

I half-jokingly responded:

To qualify as a bonafide startup today, your company:

- Must have a cool name that does not describe what your company does. Example: Jangl.
- Cannot have a business model or an interest in developing one. Example: Twitter.
- Must raise as much cash as its founders can find from VCs and institutional investors. Example: Ning.
- Must have a CEO who knows that leadership is dead and that it’s all about doing what the “community” wants. Example: Mahalo.
- Should have at least one founder who went to Stanford. Example: Meembo.
- Must throw at least one huge launch party for a new product. Example: Netvibes.
- Must allow pets in the office. Example: Dogster.

Conversely, a startup cannot:

- Have a CEO over the age of 40. Example: Federated Media.
- Be based outside of Silicon Valley. Example: Wetpaint.
- Offer services that aren’t supported by advertising and that people actually pay for. Example: ConceptShare.
- Be profitable. Example: PlentyOfFish.

This is a definitive answer. Please close comments for this post.

But a serious question deserves a serious answer, so I gave this some more thought and came to the following conclusion: the startup is not a tangible phenomenon so much as it is a state of mind.

New companies develop differently. How fast they grow and where they grow (and don’t grow) can vary widely, even amongst companies in the same industry. Clearly, it’s quite difficult to come up with some consistent tangible metrics (head count, revenues, funding, etc.) that define some threshold at which point a company transitions out of the “startup” phase.

So I thought about the things that come to mind when I use the word “startup” and visualized all of the daily activities that occur at a “startup.” Here’s what goes on:

In short, when I think about a “startup,” I visualize certain activity taking place because people see an opportunity and they know that to seize the opportunity, they can’t waste time. Survival and success, both personally and collectively, are at stake every day.

It’s this “sink or swim” mentality that I think defines a startup and when looked at from this perspective, a lot of today’s hottest “startups” don’t seem to fit the definition. And most of them, ironically, are located in the home of the startup: Silicon Valley. The companies that masquerade as “startups” are little more than young “businesses” propped up by other people’s money. The founders and employees of these “startups” are not driven to feed themselves everyday because they’re not truly hungry. Comforted by Aeron chairs, foosball tables and swanky offices lined with schwag, they’re driven by a desire to, at worst, give their investors enough to keep the food coming, and to, at best, get a lifetime supply of filet mignons when they make their investors rich.

In other words, employees who get around the office on their unicycles, have three daily catered meals and who code away on $5,000 notebook computers, all provided courtesy of a friendly local vulture capitalist, work at the adult equivalent of a carnival. A real startup probably looks more like a boiler room than Facebook’s Palo Alto office.

Startups are about hunger, drive and the desire to realize the greatest success of all: building a business from the ground up to a point of self-sufficiency. Startups are not about “having a blast” and “changing the world” while you spend other people’s money hoping that Google will buy you out or that you can go public someday regardless of whether you built something that could stand on its own.

Successful rapper and businessman Jay-Z has a song, appropriately titled “My 1st Song,” whose lyrics, in my opinion, embody the startup mentality:

It’s my life - it’s my pain and my struggle
The song that I sing to you it’s my ev-ery-thing
Treat my first like my last, and my last like my first
And my thirst is the same as - when I came
It’s my joy and my tears and the laughter it brings to me
It’s my ev-ery-thing

This was my 100th post on The Drama 2.0 Show and with every new post, I’m still trying to put in the same effort that I did with my first post. After all, it could be my last.

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7 Responses to “What is a Startup?”

  1. Mike Rundle on January 17th, 2008 12:07 am

    Great stuff, still. I love your definitions of a startup but cry a little inside since my startup is pretty damn far away from the Valley. But then I laugh, because the further away from the Valley you are, the easier it is to make logical choices.

  2. Drama 2.0 on January 17th, 2008 12:26 am

    Yeah I think the only people who have any business living in Silicon Valley are those who enjoy the smell of bullshit. :)

  3. Michael Camilleri on January 17th, 2008 10:14 am

    The short answer based on your ‘what goes on in a startup’ thought experiment would seem to be that a startup is a company where shit hasn’t happened yet. ‘Shit’ is somewhat relative to the company but in most instances I can think of involves either:

    a buyout
    an IPO

    (Order is intentional.)

  4. antje wilsch on January 17th, 2008 11:21 am

    Drama you should be an observer to some of the funding meetings people are always telling me about. They’re a mature lesson in “oi vey”

  5. East Coast Blogging » Blog Archive » I Would Define a Startup As … on January 19th, 2008 10:30 pm

    […] There was a pretty funny response post to Allen’s post over at The Drama 2.0 Show. […]

  6. heri on January 20th, 2008 6:19 pm

    i thought this was a great post, and so true. i will use this for the future.

    i haven’t added additional blogs in my newsreader for months, but i just added you. it’s ironic because I stumbled upon your blog through the posts about capazoo.com, a “startup” based here in Canada.

  7. Cyndy Aleo-Carreira on January 21st, 2008 11:42 pm

    Seriously. Are you my husband writing this?

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