What is a startup?
6 minute read
We couldn’t think of a more fitting way to launch our new blog than by talking about the topic at the very heart of everything we do – startups.
Having ventured into the world of startups ourselves from a variety of different backgrounds, we know there is ALOT of jargon to wade through. So, we’ve summarised some of the common definitions below for your ease (and to save your Google Assistant) before explaining exactly ‘what a startup is’ to us.
At its core, you might think ‘what’s a startup’ is a basic question, and we’re not writing a ‘startup guide for dummies' here, but we’ve found that depending on which source you go to, or who you speak to, you might get a different answer.
We thought the most logical starting place was to take it right back to basics. So…
GOOGLE: ‘DEFINE STARTUP’?
The first result you get if you type ‘Define startup’ into Google is:
‘A newly established business.’
Similarly, the Cambridge Dictionary defines a startup as a small business that has just been started’ and Merriam-Webster says its “a fledgeling business enterprise.”
All the definitions imply that a startup, by its very definition, has to be a new business.
But, when you dig a little deeper, you soon realise it’s a lot more complex than that.
LET’S GET STATISTICAL …
According to Crunchbase’s Alex Wilhelm (who admits describing a startup is an almost impossible task) there are a few characteristics that you can use as a guide to figure if a business fits the startup status.
The three areas to look at are - revenue, employees and valuation.
In September 2018, Alex said that the following rough benchmarks can be used to determine when a business flies the startup nest and can no longer be considered a startup:
- $100 million in ARR if it's a software company or $100 million in trailing revenue otherwise.
- More than 500 employees.
- A valuation of $2.5 billion or greater.
Based on this logic, every business that has outgrown the startup ‘bracket’, i.e. a valuation of $2.5 billion or more, has surpassed the criteria needed to enter the ‘Unicorn category’.
The term Unicorn was famously coined just 5 years ago by Aileen Lee, the Founder of Cowboy Funds. At the time, she used the term to describe any software venture that reached a valuation of $1 billion or more.
Back then (in the distant past that is 2013) only 39 unicorns existed, but by the end of 2018 there were almost 400 ‘billion-dollar startups.’
The explosion of the startup economy and venture-backed new businesses, especially in the UK Tech Space (link to UK tech market blog which is in progress), is pretty clear based on the 2018 ‘benchmarks’ above, versus parameters set just 5 years ago. It’s almost impossible to keep up …
A STARTUP = GROWTH
One of the most important things to think about when asking ‘what is a startup’ is to not put too much weight on the numbers, but more emphasis on the shared qualities of fast-growing, successful startups.
With that in mind, we tend to agree with Founder of Y Combination Accelerator, Paul Graham’s definition when he says; “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.”
The ‘growth mindset’ and a purpose to scale at speed is something that we personally see in the majority of our clients.
SCALABILITY, TALENT AND TECHNOLOGY: THE THREE STARTUP HALLMARKS
The World Economic Forum reported that fast-growing startups (or Hypergrowths), display three core qualities which are key to their success.
1. Scalability - Scalable Business Models
2. Talent – hiring for attitude and aptitude
3. Technology – using technology for agility
According to WEF ‘Talent is perhaps the most significant factor for hypergrowth companies’ and we couldn’t agree more. It’s the main reason Confido was founded, to connect awesome talent with amazing opportunities.
To paraphrase, the report, which you can find here, purpose-driven culture is the key to attracting the right talent.
Creating a purpose-driven culture, and remaining true to it, is no mean feat. But it's something that we truly believe is the core of our clients' success.
It’s the reason that you hear the phrase ‘startup mentality’ so often. It’s not just the stuff of myth that many long-established businesses try and fail to capture. It’s a genuine love and passion that drives a business with a truly purpose-led mission.
These are the hallmarks of what a startup is to us and why we’re so passionate about helping our clients on their scaling missions (because its a mindset we share ourselves).
SO, WHAT IS A STARTUP?!
So, if you circle back around to the original question. A startup is so much more than a newly-founded business. It is so much more than a revenue-based figure, or level of funding.
Although these figures and definitions do help to an extent, the growth missions and truly purpose-led culture are the key characteristics of the startups we work with today.
Our Founder, Craig Turner, works with startups every day, so we asked him what the term startup means to him,
“A startup has a product or service that solves a real-world problem (external) and aspires to scale as a business (internal). The solving of a real-world problem is very much geared towards the user/customer needs within the market. The scalability of the business breaks down into the company’s vision, purpose, culture, people, business model/commercialisation and technology being built in a way that can grow sustainably at pace.”
In future posts we’ll be talking about the key characteristics that startups looking for and providing tangible advice on how you can stand out to startups, so keep your eyes peeled.
If you need help connecting with the right talent, or just want to speak to someone who truly understands the importance of culture and purpose and how to harness this in your journey, we’d love to hear from you. Say hello at firstname.lastname@example.org.