Should 10-year-old companies call themselves startups

When trying to find an in-depth startup definition, the picture is often incomplete.

• What is a startup?
• What is not a startup?
• When does a startup stop being a startup?
• Unicorns explained
• What are the key characteristics of a startup?
• Up-to-date startup definition?

We all know different organizations coming from all sorts of industries – from real estate agencies to nonprofits, calling themselves startups because of the lure of innovation attached.

The label may even help companies to cash in on the ‘look at me, I am so cool’ factor when hiring, allowing them to snap up qualified staff on the cheap by attracting people with the promise of innovation and a ping pong table.

But are they all startups? No.

So what is and what is not a startup?

Let’s begin with what a startup definition is according to entrepreneurs

Many entrepreneurs and renowned businessmen defined a startup as a unique combination of culture and mentality while building a business by using an innovative idea while trying to solve a critical pain point.

Is a startup only an organization trying to solve a problem, offering a unique solution with no guarantees for success? Or there is more to it?

As entrepreneurs are the people founding the startups, they are supposed to know better than anyone else what their creation is. Let’s have a look at where their focus goes.

“In the world of business, the word ‘startup’ goes beyond a company just getting off the ground. The term startup definition is also associated with a business that is typically technology-oriented and has high growth potential. ” –  U.S. Small Business Association

“Startups have some unique struggles, especially in regard to financing. That’s because investors are looking for the highest potential return on investment while balancing the associated risks.” – SBA

Stanford professor Steve Blank describes it as “an organization formed to search for a repeatable and scalable business model”.

“Keeping that dynamic culture at a company gets much harder with every new employee and with every year that passes,” noted Matt Salzberg, CEO, and co-founder of dinner set delivery service Blue Apron.

Jan Koum, the co-founder of $19 billion WhatsApp, says “A startup is a feeling”.

“A company which is five years old can still be a startup,” writes Y Combinator accelerator founder.

“Ten years old startup would be a stretch.”- another startup definition by Paul Graham.

One thing to agree on: the key attribute of a startup is its ability to grow and after about three years in business, most startups stop being startups.

What all the above-listed definitions have in common is potential.

What is not a startup

Founders protest that a startup definition is based on a culture not delineated by metrics and that a startup can remain so at all ages and sizes.

“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.

Many founders would also disagree that acquisition negates a startup status. Although the definitions of acquisition differ, an acquired startup becomes part of a bigger company and a different entity. A common startup definition is no longer valid in that case.

Similarly, a company contemplating an IPO or one that has already gone public is far from being a startup. And if you’re flying first class and wearing a suit to work, you’re no longer a startup.

How turnover is related to a startup definition

If you are generating revenues below $20 million, have less than 80 employees, and remain resolutely in control of the company you started, you’re likely running a startup.

Likewise, if you’ve just set up a tiny for-profit enterprise and are intent on it becoming big enough to take over the world – even if you’re still working from your bedroom – you’re probably a startup founder.

Speaking of startup definition – is Uber, which has a $21 billion valuation and is 9 years old, a startup? What about Facebook which is 11 years old or Google (17 years old). Are they startups too? Not anymore. Today Xioami, Uber, and the rest are, at some point, no longer startups. They are unicorns.

What is a unicorn

The term unicorn was introduced in 2013 by Aileen Lee, a founder of Cowboy Ventures. A unicorn is a startup which has a current valuation of more than $1 billion. The term was meant to underline the rarity of incredibly successful startups. The startup’s definition of a unicorn has stayed unchanged.

In addition, the number of unicorns has increased. According to a report by CBInsights, there are a total of 237 unicorns globally in 2018.

 Here are a few startups obtaining unicorn status in 2018:

• Canva – multimedia & design software, valued at $1 billion
• Meicai – platform software, valued at $2.8 billion
• Caocao – automotive, valued at $1.6 billion
• Cabify – automotive, valued at $1.4 billion
• Snowflake – database software, valued at $1.8 billion
• HeartFlow – decision/risk analysis, valued at $1.5 billion
• OrCam – HC devices, and supplies, valued at $1.0 billion
• In addition, here is a list of 57 startups who made it to the top in 2017.

 Some of the unicorns have lost their horn

• Souq, which after a wild ride was acquired by Amazon for $650 million
• Shazam, which in the end Apple purchased for $400 million

And some unicorns lost it all and cost their investors billions

• Jawbone – a few years ago, it was a $3.2 billion company and today it’s worth nothing. The news of Jawbone’s liquidation came as a surprise. Jawbone declined to make a comment.
• Powa Technologies – despite reaching a value of ￡2.7 billion, the e-commerce service provider went bankrupt within three years. The company suffered from lack of good management, wasting hundreds of millions of corporate funds on parties with topless dancers.
• Theranos – the medical tech company has lost its unicorn status. From $9 billion, its valuation went down to $800 million between 2014 and 2016. Fraud led the company to fall from grace.

 Finally comes a startup definition that makes sense:

• A startup is a company no older than 3-5 years
• Using an innovative/disruptive business model or technology
• Targeting a significant revenue and staff growth
• Thriving in a high-risk environment
• Facing lower local competition & often higher global
• Financed by business angels, investors, government programs, venture capitals
• A startup is a state of mind – innovation based problem solving
• Founders forgo stability in exchange for the desire of tremendous growth and the excitement of making an impact

By fulfilling the first, and at least one of the second or third aspects is what makes startups stand out in the crowd of small and medium enterprises.

To be a startup is to claim a fresh attitude to innovation and have an intuition that allows you to keep a finger on the pulse of the future combined with a global mindset.

In addition:

• 80% of all startups survive their first year of existence
• Half of all startups do not exist after their fifth year
• One-third make it through to their tenth year
• And the numbers above have remained consistent for the last 20 years
• A startup is a young company made to grow fast
• Being recently founded does not in itself make a company a startup
• It does not have to be a tech company to be a startup
• It does not have to be venture-funded or have an exit
• The essential element is growth. Everything else related to startups takes after growth. Lots of companies grow quickly…not all are startups.

 Components of the Startup Frame of Mind

• Hard-working founders and loving it
• Disruptive innovation
• Aligning business with personal objectives
• Agile thinking and lean concepts
• Acceptance of failure and pivoting
• Work with the pulse of the market
• Customer/user-oriented
• Flexible and open-minded
• Faith… in your idea, in your abilities, in your team, in possibilities
• Global mindset and getting diversity right

 At what point is a startup no longer a startup

People have tried to set a limit on what constitutes a startup, using various metrics such as a number of employees, number of funding rounds, revenue, or profit.

On his quest to give a proper startup definition, TechCrunch writer Alex Wilhelm defined what makes a startup an actual startup by proclaiming his own 50-100-500 rule – if companies meet/exceed any of the following criteria, it is not a startup:

• $50 million revenue run rate (forward 12 months)
• 100 or more employees
• worth more than $500 million

Is that all?

Let’s look deeper into a few unique Startup Characteristics:

Disruptive Innovation (key startup characteristics)

Nearly all the very successful startups have disrupted their industry.

Below is a list of leading startup industry disruptors from all over the world:

• Transport industry – Uber changed the way people book cabs
• Hotel industry – Airbnb – capitalized on the sharing economy
• Social networking – disrupted by Snapchat
• The world of content delivery networks – disrupted by Cloudflare
• Analytics – DCIG, CityScan
• Big data – Quantified Communications , Switch Automation,  InsightXM
• Cloud and IT services – Mercury Technology Group , Silver Peak Systems
• Crowdsourcing – AHHHA
• Education – Dewsly
• Healthcare – CareLink360, ClickMedix, Tiatros Inc., Visbuzz, Blue Marble Game Co., Televero Health, Vivify Health, Clinical
• Hardware – Third Dimension Technologies
• Marketing media – Clypper, FEM, NextUser, Phocabby, Superdense, Phunware
• Nanotechnology – ACTnano
• Retail/e-commerce – Quarterly, Skinnyprice
• Security – Authentication Industries, EyeVerify, Rippleshot, Cyphort
• Software – Xockets, LayerX Technologies, Fastly, Humm, TRX Systems, Mindaptiv, Vault Solutions, Software Motor Corp
• Cloud computing – ConvergeIO
• Travel – BedyCasa
• Web hosting – Nexcess, CloudNine Discovery, SanApptX, Cloud Dynamics
• Communications – Storedot
• IT/AI – Graphcore
• Health/early cancer detection – Grail
• Business/cybersecurity – Bugcrowd
• Health insurance – Jamii Africa
• Software/digital identity – AidTech

First Mover’s Advantage (key startup characteristics)

First mover advantage is about:

• Establishing strong brand recognition and product/service loyalty first
• Turning their product into the industry standard
• Having the ability to control key resources
• A strategic location
• Who has premium contracts with suppliers
• Who hires the most talented individuals

Disruption and first mover’s advantage always go together. Startups capitalize on innovation, and at the same time improve their market position by constantly improving.

It is not always about which company introduces a product or service to a market first.

Here are a few first-mover examples – a few startups that will rock the world:

• Paptic – these guys will be taking over the world of retail packaging with their 70% biodegradable hybrid material that can be recycled
• MaaS Global – the app covers all kinds of needs for mobility
• Soilscout – IOT – moisture, temperature and salinity sensors, which are buried underground and provide real-time feedback and analysis
• ASMO Solutions – puts your mind at ease with a special, high-quality universal phone charger
• Thingsee – a potential Lego of the internet of things and real-time data giving you feedback by SMS for anything from your suitcase, car to a container – huge use potential
• Leeluu steps ensure every kid or adult gets the right amount of light at night to make them feel safe
• Venuu – AirBnb for spaces – to rent or host events
• Eximap’s Auto Mopus will control the future cars by an app
• Pollen – you won’t have to wait to grow your app
• Valossa machine learning video engine to find data from huge data libraries
• Vau – templates for personalized greetings, product ads tools for live events, combines them with customer databases, product catalogs, and pricing strategies and live video feeds…as a result, the right people receive fresh and relevant personalized video at the right time
• Musopia – their Fourchords app helps all ‘would-be’ guitarists by teaching simplified chords interactively with a rich library of songs and lyrics included

 Technology Capitalization (key startup characteristics)

• 87% of the products are software
• 7% are hardware
• 6% are other products and services

Almost all of the startups at some point capitalize on the market by implementing technology shifts.

• Uber made it possible to book a taxi through a phone app
• Airbnb made sharing over the net possible
• Dropbox capitalizes on cloud tech, etc.

Consumer Focused Startups (key startup characteristics)

According to my research – 62% of the startup are B2C. They focus their business models on making life easier, more pleasant and affordable for their consumers.

Spotify makes it easier to listen to music from all over the world, Instacart is an app allowing people to order groceries with a tap of a screen and to receive an order in less than an hour, etc.

Most Startups are Private Companies (key startup characteristics)

Most startups are private companies who receive a valuation when a bigger company acquires or invests in it. Sadly, many entrepreneurs get paid on the exit for the first time.

According to WSJ, Wall Street is dealing with new challenges in one of its bedrock businesses, taking young companies public, as more startups choose to stay private for longer.

Jay Simons, president of software development company Atlassian, said that when his firm raised $150 million from selling shares to outside investors including T. Rowe Price Group Inc., he shopped the deal to a small number of investors his team knew and wanted to court as long-term holders. Atlassian didn’t use a bank on the deal, which valued the company at $3.3 billion, according to Dow Jones and VentureSource.

New Companies are Not Limited To Tech Startups Only (key startup characteristics)

Speaking of startup definition, while most people think that all startups are tech related, actually only 87% are.

As you see in the disruption section above, startups can emerge in multiple industries.

Here is a list including the best industries for starting a business right now are:

• Disaster relief is expected to jump to $11.2 billion in 2022 from $10.1 billion in 2017, according to IBISWorld
• Proteins from non-traditional sources – the market accounted for $4.2 billion in 2016 and is expected to grow 6.8 percent between 2017 and 2022, according to Research and Markets
• eSports – the industry is expected to reach $1.7 billion in 2020, up from $1.1 billion in 2018, according to SuperData Research
• Influencer agents representing social-media stars turning followers into cash – revenue for the industry is expected to increase to $10.8 billion in 2022, a 2.2 percent jump from 2017, according to IBIS
• Integration of tech and the beauty business – the beauty market is expected to jump to $27.8 billion in 2022 from $22.1 billion last year, according to IBIS
• Reproductive health with fertility-tracking apps and services – estimated between $9 billion and $11 billion globally by Harris Williams
• Canned wine jumped to $32.3 million last year, a $29 million increase from 2014, according to Nielsen
• Elderly care – innovative ways to care for the large population of ageing baby boomers. The industry generated more than $50.7 billion in revenue in 2017, expected to increase by about 42 percent by 2022

In conclusion

Speaking of a startup definition…a startup is an enthusiasm-based roller coaster that can either become a disappointment or an achievement.

The individual behind a startup is an innovator, a pioneer, a visionary, and to some degree an out of the box thinker who finds an ordinary 9-5 job dull. Entrepreneurs believe that great ideas can change the world by working with passion and energy often in front of a computer screen.

Also, tireless work has been known to steal a couple of years of an entrepreneur’s life as well as add grey hairs. However, consequently, it can be very rewarding both financially and emotionally for those pursuing it with dedication.