
What is a startup? - jot
http://swombat.com/2011/12/17/what-is-a-startup
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buro9
Eric Ries has a good definition in the Lean Startup:

"A startup is a human institution designed to create a new product or service
under conditions of extreme uncertainty."

Is every new company a startup? No, lots follow templates within fairly known
parameters, such as Restaurants. The uncertainty isn't there to the same
degree, and the offering is known. They are a new company, but not a startup
company.

Is every old company not a startup? No, many have to deal with the innovators
dilemma and as their main business face competitions are forced to confront
uncertainty and create divisions to reinvent themselves, these divisions would
be considered a startup.

Eric defines a startup by the uncertainty factor, and by the creation of a new
offering from that uncertainty.

Edit: typo corrected

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sivers
Typo: I think you meant to type UNcertainty. The quote from the “Lean Startup”
book is:

“… a human institution designed to create new products and services under
conditions of extreme uncertainty.”

Assuming most readers know what you meant, but just had to correct it, for the
record.

~~~
amorphid
I like Eric Ries' definition. To me it implies the startup is trying to figure
out some hard stuff and that if they nail it it could be HUGE! A non-startup
reminds me of any ol' business that is just making money and is boring on a
day to day basis.

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jjm
From PG's "Want to start a startup?"

"... a startup is a new business designed for scale ..."

more in context:

"... The first component is particularly helpful in the first stage of a
startup's life, when you go from merely having an interest in starting a
company to actually doing it. It's quite a leap to start a startup. It's an
unusual thing to do. But in Silicon Valley it seems normal. [3] ...

[3] Starting a company is common, but starting a startup is rare. I've talked
about the distinction between the two elsewhere, but essentially a startup is
a new business designed for scale. Most new businesses are service businesses
and except in rare cases those don't scale.

"

The actual article: <http://www.paulgraham.com/hubs.html>

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balajiviswanath
My definition: A startup is a 1-5 year old company that has a potential to
grow up its enterprise value by 50X within the next 5 years and has a business
that can scale up quite easily.

This would filter out all the usual suspects Facebook, Twitter, 37 signals,
while keeping Path, Instagram and all the YC funded companies. It would also
cut out the new neighborhood bookstore, most service businesses and that sweet
home business. Also it would cut out companies that have already reached
$1-2bn in valuation (as they cannot realistically grow to become $100bn
companies in 5 years).

~~~
rmason
I was planning on commenting along the same lines but you've nailed it.

I get sick of these 10 year old successful companies constantly referring to
themselves as startups. That's similar to a thirty year old calling himself a
teenager.

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gghootch
Let me start-off by saying that my notes on this are basically thought-up on a
whim and should probably be considered as light remarks. My knowledge on what
is and what isn't a startup is limited.

Notes on your definition:

You could exclude apple as an outlier by changing "in the next few years" to
"in the first few years".

Concerning the significance of growing by a large factor; you might want to
consider changing the absolute number to a recurring value. 500 users in the
first year which turn into 5000 after five years is hardly significant.
500*5^5 = 1.562.500 is starting to feel significant. The actual growth factor
per year might need to be altered.

"repeatedly grow by a large factor (5x or more)"

Ambitions and plans could be refactored to "aims"; if you're aiming to do
something you probably have the ambition and you sure as hell need to have
some plans or your ambitions won't go anywhere. Although it might be better to
explicitly mention ambitions and plans.

In conclusion, my refactored definition would be

"A startup is a business which aims to repeatedly grow by a large factor (5x
or more) in the first few (1-5) years.

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TamDenholm
My personal definition of a startup is a company that is not yet a business.
Which then brings up the definition of business. To me a business is a company
that produces a stable profit, maybe 6-12 months profit.

Personally i think calling very well established businesses like 37signals a
startup is quite insulting, as to me, its saying they're not successful, which
they clearly are.

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thesash
The key differentiator addressed by both Steve Blank and Eric Ries in their
definitions, is that a startup is innovating. A company taking an existing,
proven business model and attempting to build a business based on it (whether
in the tech space or elsewhere), does not qualify as a startup, even if it is
aiming for hyper growth.

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thurn
I actually don't think I've heard "startup" used outside of the tech sector. A
new oil company is basically a startup (they take VC, have few employees, and
are trying to grow dramatically), but they're never called that.

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DanielBMarkham
Scaling is the key here. Startups are able to scale, whether at 5x, 10x, or
20x really doesn't matter. The point is that they can scale much faster than
other types of businesses. This usually involves technology and automation,
but not necessarily.

I like PG's "make something people want" It describes a successful startup. So
successful startups make something that people want that they can scale
tremendously. As swombat points out, big companies just can't keep making the
magic happen, so by my definition they stop being a startup.

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DrCatbox
People dont know what they want. You can create markets.

~~~
DanielBMarkham
The intention here is not that a person has some specific idea of what they
want and then you make it, that's thinking of the test backwards. The
intention is that when presented with something you have created, a person
will want it. So yes, you can create markets. Or you can chase markets. It
works either way, because it's the meeting of product with potential consumer
that matters. Along those same lines, you might invent a cure for cancer, but
if nobody sees it, you really haven't done much.

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dcpdx
I think of a startup as a hypothesis, much like you'd find in science. Take
problem X, apply Y solution, and make money by doing Z. The process of failing
fast and often is akin to performing different experiments on what works and
what doesn't. The major difference is that science is science and the results
are clear cut and objective; with a startup, your results will depend on the
quality of your team, the original idea, ability to get funding, market
timing, etc.

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astine
I've always felt that a "startup" was any business which was not yet
profitable or had not yet reached a certain 'scale' appropriate for their
industry and ambitions.

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moses1400
Here's my post from 2008 where I ask my readers to help me define what a
startup is - I also list some companies wondering if they are startups:
<http://www.centernetworks.com/startup-definition>

If we go with the TC definition, Facebook is still a startup :)

What I really want to know is what is the difference between "startup" and
"small business"?

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ajones05
This is easily applied to software but not necessarily services, which cannot
scale the same way. Unless you mean to say that no services company could ever
count as a startup.

I think it has more to do with the current state of a company - that is,
immature: still figuring out internal roles, processes, possibly no finalized
monetization strategy, etc.

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jot
I'm not sure this part works: "to grow by a large factor (10x or more)".

Most businesses I come across that describe themselves as startups and fit the
rest of the definition, haven't yet got themselves to a point where a 10x
improvement over the next year would make them that significant.

~~~
jot
I'm specifically thinking of participants in accelerator programes like YC,
TechStars, Start-Up Chile and SeedCamp.

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aaronmarks
a word

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billpatrianakos
I really like your definition and after reading this, I can't help but think I
might have been that person who argued about your definition. If I am, I am
very flattered that something I said got you thinking along those lines.

However I'd argue with you about Apple. Like you said, Apple didn't hit the
time-frame requirement. Wouldn't you also agree that a true startup needs to
have the requirements you listed but at the same time start from zero.
Companies that just start out, have the growth you talk about in the time
frame you talk about would definitely be startups. Companies that have been
around for a while and suddenly have explosive growth and hit the other
requirements only resemble startups. Google, Apple, and Facebook _feel_ like
startups but have certainly grown out of that phase. Being a startup in my
opinion a one-time phase that you cannot go through again once you're
established no matter how explosive your growth is.

In any case I like your definition and I think it's important that we have
one. The word startup is easily overused in an attempt to attain that cool
factor some companies have and to ride a trend instead of getting by on the
companies real merits.

~~~
swombat
You were one of the people in the argument indeed, I linked to it:
<http://news.ycombinator.com/item?id=3356517>

