What is a startup?

July 30, 2014

I want to ask a question, give my opinion, and complain about something.

“What is a startup?”

I’ve run into two schools of thought on what a startup is.

  1. The Webster’s Camp

The fine folk at Webster’s use this definition “a fledgling business enterprise”.  I would phrase it as “A business that is just starting”.  The first result from asking Forbes search bar is this article, “What Is A Startup?”.  The article largely agrees with Webster’s and talks about an entity ceasing to be a startup based on things like revenue, size, or sale value.

  1. The Wikipedia Camp

The fine community at Wikipedia use this definition “a company, a partnership, or temporary organization designed to search for a repeatable and scalable business model”.  The book “the lean entrepreneur” says this, “startups exist to learn how to build a sustainable business”.  I think I can safely agree that an entity with a repeatable and scalable business model is not a startup.

I don’t like definition 1.  This line of thinking is too broad and unhelpful.  What use is it for me to have a category of businesses that haven’t grown into success?

I do like definition 2.  This allows for lots of different types of entities to qualify, but restricts them to a specific activity and purpose.  Having the focus be the direction instead of the state of the entity makes sense to me.

Example 1

Is an LLC that starts up and builds a new McDonald’s franchise a startup?  The LLC is certainly a fledgling business enterprise, but it fails the litmus test for definition 2.  It already has a proven repeatable and scalable business model.

Example 2

Is my personal internal project, VLAT, a startup?  SEP has a proven repeatable and scalable business model.  However the VLAT project is not part of that model.  It is an attempt by the existing company to create a second business model.  Definition 1 doesn’t even seem to differentiate a startup from a company.  So what does it even have to say about VLAT?

Example 3

Was YouTube still a startup after Google purchased it?  Definition 1 criteria point to no.  It had large revenues and was sold a substantial amount.

I think it was still a startup though.  The large revenues didn’t match the large cost of operation and it wasn’t profitable at the time of sale.  Google spent years following the sale changing YouTube’s business model in an attempt to make it profitable.  Clearly they didn’t believe it had a repeatable and scalable business model when they bought YouTube, but what Google saw was an entity with potential to produce one.

I don’t believe I have a complete argument to convince anyone one way or the other.  What I hope I have is enough to get someone thinking about my point of view so that they can inform themselves and form their own opinion.

Now for my favorite part, the complaining.

At SEP, we have our own internal Startup Weekend.  This is the wrong name for what we have typically done at our bi-annual, weekend coding event.

This article, “Why Startup Weekend Is Not A Hackathon”, does a great job of explaining why what we have done is a hackathon(really two or more simultaneous hackathons) and not a Startup Weekend.  Some of us have discussed actually trying to do startup activities, like customer research and business model development, as part of our Startup Weekend.  That would be cool, but I don’t see the hackathon activities ceding as the primary focus.

Should we change the name?  There’s history to the current name, but there’s also the real possibility of misunderstanding.  With the current name, we mislead those who know what the name should mean about what we do at our Startup Weekend.  We also mislead our own people about what a startup is, and what it takes to create a viable product in the market.  My vote is we should change it to Hackathon or something entirely new.