The Startup definition seems to be getting complicated day by day.There is no hard line of what separates a Startup from any regular company.
Based on Paul Graham’s article, lets take a look at what it means to be a Startup.
Being newly founded does not make any company a startup. Millions of company are started every year of which only a tiny fraction qualifies to be a Startup. So how do you qualify to be a Startup:
- A company designed to grow fast: How fast does a company has to grow to be considered a startup? There is no precise answer to that.
The best way to measure the growth is revenue. For companies that do not charge their services initially the reasonable proxy would be the count of active number of users.
Active members should be a healthy ratio of new customers to existing ones. If you are getting a constant number of new customers every month, there may be trouble, because that means that the growth rate is decreasing.
- Is of a different nature than regular companies: The inherent DNA of a startup is to be different from the start. Tt is the same difference as is between the destiny of a redwood seedling and a bean sprout. Google was designed to be different whereas a barber shop is not.
- Not mandatory to work on technology: Not all startups have to cater to the field of technology. There are a variety that can cater to other areas and use technology to serve them better.
A list of Simple Ideas that have been converted into Successful Startups: https://vaishalivr.wordpress.com/2017/01/06/simple-ideas-that-became-successful-startups/
Working on technology as a principle idea is the most common recipe, but not the only one.
- Find an idea in everyone else’s blind spot: The space of ideas has been so throughly picked over that a startup has to work on something that everyone else has overlooked. The founders of successful startups are sufficiently different from other people that they find an idea in everyones blind spot and from there on make a conscious effort to stay there.
- Innovate: Startups create new ways of doing things, which in a broader sense is new technology. When a startup both begins with an idea exposed by technological changes and makes a product consisting of technology in the narrower sense, its easy to conflate the two. But the two connections are distinct and in principle one could start a startup that was neither driven by technological change nor whose product consisted of technology expert in broader sense.
- Make something that lots of people want: A startup has to make something that it can sell to a big market. Google and a barber shop are the same w.r.t. this point. Almost, everyone wants a haircut.
- Reach out and serve those people: The difference between the two lies here. A barbershop serves customers in person and a few will travel far for a haircut. And even if they did, the barber shop would not be able to accomodate them. It is not lots of customers that you want but a big market. Meaning (number of customers)*(how much they pay) should be very high.
- Be good at technology and face problems solved by it: What is different about successful founders is that they can see different problems. It is particularly a good combination to be good at technology and to face problems that can be solved by it.Origin of Apple: Steve Wozniak’s problem is that he wanted a personal computer way back in 1975. Technological changes was about to make it a moer common problem amongst people. Because he not only wanted a computer but knew how to make one, the problem he solved for himself became one that Apple solved for millions of people in the coming years. By the time it was obvious for ordinary people to own a personal computer, Apple had already establised itself.
Origin of Google: Larry Page and Sergey Brin wanted to search the web. unlike most people they had the technical expertise to notice that existing search engines were not as good as they are supposed to be and how to improve them. Over the next few years their problem became everyones problem as the web grew in size and you did not have to be an expert to notice the shortcomings of the exisiting search engines. By the time everyone realised how important search was, Google was entranched.
- Does not necessarily look for venture funding or exit: A startup can continue to be a startup without looking for venture funding. The founders may choose to burn into their savings till take-off time.
- Uses growth as a compass to make every decision: It is advisable that startups pick up a growth rate that they can hit every week, and just try to hit it. If they fail, they should be alarmed. You can use this target growth rate to make all the decisions for you. Anything that gets you the growth rate that you need is right. And in case you experience the pain of missing your target for a week, you will be interested in anything that will spare you such a pain in future.
Its not that you live week-by-week and not think about the future, just that you think about it no more than necessary.
- A company that can fail: There is no perfect recipe for making a successful startup. If you don’t derive one fast, failure is bound to happen.