What is a startup?

Startups are now a critical part of our economy and society because they defy a lot of the rules of traditional business. As a citizen, you must understand startups to understand the changes that they bring to our economy and how they can affect your life.

If you are interested in entrepreneurship you must know what a startup is to know which rules to follow. And if you are an employee or investor, you must know which businesses are real startups because it will change the investment (in time or money) that you are willing to make and what return of investment you can expect.

This series of article is focused on giving you the tools to have a good bullshit-o-meter when it comes to "disruptive" businesses.

Welcome to Startup 101.

Do you have a clear definition of a startup? 

All tech companies are not startups. And you can create a very successful business in 2020 without creating a startup. In fact, it may be exactly what you need and I assure you that understanding what a startup is will still tell you a lot about business.

As coined by Steve Blank :

"A startup is an organization formed to search for a repeatable and scalable, business model."

But what does it mean?

• An organization is a collection of persons and ressources structured for a particular mean.
• It is formed to search for something, which means that a startup is a business in a temporary state. It is in the name : a startup is just the start of something bigger. Once it has found its business model, it is no longer a startup. That is why you will sometimes hear about "scale ups".
• "A business model" is not only about revenue. It is the blueprint of how your organization is structured to create, deliver and capture value.
• Your business should be profitable. The goal of a startup is to make money. You can lose money at first because investors can bet on you. But they will not support you if they have no profit to make.
• The model should be scalable. Economies of scale are a fundamental notion of any enterprise. The holy grail of startups is to have declining marginal costs for you and increasing marginal value for the customer. It means that every new client you have costs you less resources to serve than the previous one and gets a better service than the previous one. Sounds like magic? Well that's why startups and digital technologies have so much potential!
• The model should also be repeatable. You must create a system that will reliably work across time and space. If your plan to make money relies on a particular event that will only happen once, or not often enough, it is not a startup.

Key takeaways:

• A startup is made to grow exponentially. If your company does not aim to make millions of dollars in revenue and serve users all over the globe, chances are it is not a startup.
• The search for a new business model is very hard and is quite long. Startups need constant experimentation to find innovative ways to answer a problem.
• A startup does not need to be profitable from day one. Most startups are not.
• A startup should leverage ways to be more profitable as it grows.
• You can create a company that is not a startup and be very successful. You can even use the startup methods and be stronger than them, because being a startup has drawbacks: being forced to reinvest any penny that you make to grow faster and to aim for millions in revenue does not fit everybody.

In the following articles we will cover more deeply, among other things, why you should (or should not) create a startup, how to create a successful startup and how to evaluate one.

Please ask any ? that rose from the article and put a ?? if you found it interesting !