Do we need a better definition of a Startup?

Assume grade 7 debating team voice: “The dictionary describes a startup as a newly established business”

When you hear the word ‘startup’ what do you think of? Hipster workplace with millennials nursing a craft beer decked out in the latest tech? Maybe not quite that clichéd, but when I hear the phrase ‘startup’ being used in association with small businesses like restaurants or hair salons – my spidey sense tingles.

Am I wrong?

As Shakespeare would have it, “a rose by any other name would smell as sweet”.

But what makes a rose a rose?

The term ‘startup’ has been as maligned as the word millennials; being young doesn’t make you an ungrateful avocado monster with no work ethic, and being a young new business doesn’t make you a startup.

Maybe it’s semantics. But then again, maybe it matters.

But what is a startup, really?

As has been said by many: A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed

But couldn’t that be any business? Surely, a startup and traditional new businesses differ in several ways.

And if so, why try and claim yourself as a startup if you’re not one?

Remember when there were only a handful of supermodels? Christy Turlington, Naomi Campbell, Eva Herzigova, Helena Christensen, Claudia Schiffer and Elle Macpherson. (And yeah, I had to google all of those names). Now, whether the annoying progeny of a Rolling Stone or a Hollywood love child, the term ‘super’ seems to apply to anyone who’s paid a lot to model.

It’s the same thing with startups. If it’s at all possible for a business to be ‘sexy’ then perhaps we can see how startups are the supermodels of the entrepreneurial catwalk. And when you look at how those supermodels have progressed, it’s easy to understand why so many business founders are eager to describe themselves that way. I mean, why be a model if you can just brand yourself as a ‘supermodel’.

I often find myself (irrationally) annoyed by some business owners describing their business as a ‘startup’ which has given me a reason to try and better define what I believe a ‘real’ startup is.

For me, a startup needs to be striving for the betterment of their customer with a business model that can scale. Better + Scale

Better

A startup is a business that makes something better. Not better for you the founder, but better for your customer. It disrupts, challenges existing practices and innovates.

Better can be more efficient, effective or equitable. (The 3 E’s of a better startup )

It is not a market opportunity. A market opportunity is a chance for you, the business owner to make some money through smart positioning. There is nothing wrong with this, but this is not a higher calling, and it indeed can’t be defined as being rooted in a better customer product.

For example, an exclusive distribution right for plastic zip ties is a market lead opportunity, a long time ago a when the zip tie was created it could have been a startup, but not anymore.

A new Mexican restaurant in an underserved region is a market-lead opportunity. A new flavour of a carbonated drink is a market opportunity.

Many existing definitions of startups focus on the opportunity to scale and even accept a market gap. I want to propose today that a market lead opportunity does not represent a startup. That is not to say that there is not a gap in the market, it is just that the market is defined by the problem and the solution first.

Solution based products are designed to solve a problem, and the people with this problem are your target market.

And herein lies one of the core attributes of a startup, its culture. You see, evangelistic employees join a company because they align with the company vision. That vision is connected to a better world which the company will help to create by creating a solution to a customer’s problem.

And at the heart of this culture, is the startup founder.

Where supermodel Linda Evangelista famously wouldn’t get out of bed for less than $10,000 a day; a startup founder will stop at nothing to see their vision realised. Startup founders don’t track billable hours, or clock off at 5. They have a fire that motivates to keep going in the face of uncertainty. And what I’ve found is startup founders tend to be open, honest people keen to share their experience for the common good. They talk openly about their failures and their plans, driven by a sense of a greater purpose.

Without this greater purpose, you can’t be a startup. In my experience, this is why startups feel the way they do when you’re inside, yes you’re a business, but you’re a business that is creating efficiency, effectiveness or equality.

There are many startup definitions that try to quantify startup culture as part of the definition of a startup, but this approach is looking at the resulting culture rather than the cause which is the high purpose of the startup’s problem-solving mission.

Now, because a startup is solving a problem, it means that the path to success is unclear. You need to explore and discover this new path to success. This is a critical characteristic of a startup, they are exploring new groups, creating new standards and rules.

Just like Edmund Hillary climbing Everest, he knew to pack, food, water, shelter and seek as much local advice as he could. A startup founder has basic rules they need to follow, but the core of their business, the problem they are solving is uncharted territory.

And here’s the kicker. Once you’ve found the path, it will be easier for others to follow you. So if the core proposition of the new business has already been mapped out, then it is not a startup. If you’re an Uber clone, you might be a new business, but you’re not a startup. This is also the reason why a startup seeks venture capital and not a bank loan. If the path was well documented then a Bank would be willing to lend against known risk variables.

Scale

The second factor is scale. The second half of my definition is generally accepted by most people who have defined startups.

A startup founder does not trade time for money. The more time you put into your problem’s solution, the better your chances, but there is not a direct relationship between time and money.

This is the second reason Venture Capital is required and attracted to a startup. Not just because a bank won’t lend, but because the solution needs to be scaleable.

It is possible for a Startup to outgrow its status as a startup and for me; this is when the business has proven their ‘better’ solution at ‘scale’. The business has ‘solved the problem’ they set out to fix.

I believe a true startup founder sets out to create a new scalable business that at its core solves a problem that has not been solved before making life better for the customer, thus disrupting the status quo. ‘Better + Scale’.

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