When Is a Company No Longer Considered as a Startup?

 

Startup illustration | Image: lgt.com

We are familiar with the household names; Facebook, Starbucks, Uber, and so on, and we tend to sometimes forget that these big names were once called (and are even still called) startups. Now, one of the numerous million-dollar questions of business growth is, how did these companies graduate from being recognized with the "startup" title? At what stage did business industry leaders realize that they have surpassed the title of a startup? To answer this, we must first recognize what a startup is and when a company outgrows the stage of being known as a startup.

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What is a Startup?

The word startup came into prominence in the 1990s when it was used to address the hundreds of tech and internet savvy dot-com businesses "starting up" at that time. With time, the term became widely used for not just the dot-coms, but all businesses that had just started. 

Definitively, Techtarget says that a startup is a newly formed business with particular momentum behind it based on perceived demand for its product or service, with the intent of growing rapidly as a result of offering something that addresses a particular market gap. In plain terms, a company that is just starting and are still exploring its market, with plans of growth is a startup.

Startups are basically set up and developed based on the founder's concept of a product, service, or business. Most founders are more focused on the development of the business than on profit, so most companies don't make a lot of profit when they are still startups, e.g. Mark Zuckerberg's Facebook started making profit 5 years after it was created. Consequently, the revenue generated by a startup in its early days is not considered as its value, but investors set their sights on its potential value in the coming years, before investing. Startups that are projected to have up to $1billion in value are regarded as unicorns.

The successes of most startups are hinged on their ability to provide a product or service which is relatively new, or improved, to its market. The failure to actualize this is the usual cause of the 10-year time-stamped collapse of 65% of the many new businesses that are created each year.

Business growth| Image: entrepreneur.com

When does a business leave the Startup stage?

There have been lots of individual opinions concerning when a company graduates from the level of a startup, as well as the next stages after startup. Some people even believe that business growth is dependent on revenue, employees, and even size. 

Balaji Viswanathan, CEO of Invento Robotics said on Quora,

When a startup has found a business model and a product that is right for the market, it stops being a startup and graduates to an enterprise.

This means that a startup is still in the process of exploring its target market and understanding how best to present and sell its products to the audience. Thus, the challenge is to find the product and product delivery or service rendering process that best suits the audience's needs as well as the company's aims. As an example, Balaji also said,

If you have a new product to enable companies to track the demographics of the customers through CCTV cameras, you don’t necessarily have a proven business model. You need to convince your customers to buy your product and convince them on their merits. The pricing is not clear and you need to evolve the feature set. You are also not clear if you should sell CCTV cameras or sell software services priced monthly.

This is when your company would be called a startup.

Based on this line of thought, it is safe to say that even older businesses that have not discovered a suitable business model are startups. Anyway, the words; new, budding, young, etc, entice the hardworking senses in man, because after all, Facebook still considers itself a startup.

Now companies can call themselves whatever title they desire, but you should note that a startup is more about corporate culture, interactions, extremely informal work environments and the perks of honest work. Do you consider your business a startup?