Definition(s) of a Startup

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The popularity in the term startup has exploded during the .COM bubble of 2000. The term is often confused to designate a small business, which is very different. In this article, I will get the definitions from of the most respected people in the startup world. Then, I will try to sum up the characteristics of all these.

Steve Blank's Definition

Who is Steve Blank?

Steve Blank is a Silicon Valley serial entrepreneur and academician. He teaches customer development in universities in California such as Stanford, Berkeley and Caltech.

What's his definition?

A temporary organization designed to search for a repeatable and scalable business model.

What's important?

Temporary: The goal of the startup is to become a real business. It either will or fail and disappear.

Search: The startup is in search of a business model, contrary to a busines who uses a known business model.

Scalable and repeatable: The startup can make money on random experiments. It's important that the business model is scalable and repeatable so it can become a sustainable business.

Dave McClure's Definition

Who is Dave McClure?

Dave McClure is an entrepreneur and angel investor based in the San Francisco Bay Area. He founded and runs the business incubator 500 startups.

What's his definition?

A startup is a company that is confused about:

  • What its product is
  • Who its customers are
  • How to make money.

As soon as it figures out all 3 things, it ceases being a startup and becomes a real business.

Except most times, that doesn't happen.

What's important?

Confused: Here again, the need to learn distinguishes the startup from the real business.

Product-Market Fit: The statup needs to find the right product for the right market.

Business Model: The startup needs to find how to make money on the long run.

Most time, that doesn't happen: Dave underlines the fact that the vast majority of startups don't make it to the stage of becoming a real business.

Eric Ries's Definition

Who is Eric Ries?

Eric Ries is an entrepreneur based in Silicon Valley and author recognized for pioneering the lean startup movement.

What's his definition

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.

What's important?

Human institution: Eric insists on the importance of the team in the startup. A good team is essential for success.

Deliver: The startup needs execution.

New product or service: Innovation is part of the process, either disruptive or sustaining.

Extreme uncertainty: The startup has a lot of questions on its environment, which it needs to clarify through learning and may not succeed.

Paul Graham's Definition

Who is Paul Graham?

Paul Graham is a programmer, venture capitalist, and essayist based in Silicon Valley. He is known for his work on Lisp, for co-founding Viaweb (later Yahoo! Store), and for co-founding the Y Combinator seed capital firm.

What's his definition?

A startup is a company designed to grow fast.

What's important?

Growth: This is the principal characteristic for Paul Graham to distinguish startups from regular businesses. "If you get growth, everything else tends to fall into place."

Designed: This word here has two meanings. First, the startup is only intended to grow fast as the odds are it will most likely fail. The second sense is that the whole business of your startup must target a big market and be scalable.

Takeways

I will not try to create another definition of a startup. These four definitions are great and can be used anytime to explain what a startup is.

However, we can sum up what are the most important points.

Uncertainty

Uncertainty is the common point of every definition. The startup has many question about its environment, its product, its market, and its competition. Learning through experiments has a big role to play here to answer all the questions by proposing hypotheses and verifying them.

Scalability

You must think about scalability when creating a startup. The goal is to achieve growth. It's important that the product you create can be proposed to as many customers as possible without needing linear costs. The business model needs to be repeatable so it can become a real business.

High Risk of Failure

All definitions insist on the fact that a startup is probably destined to fail through its quest to become a real business. Either the journey or the possibility to create a huge business is worth it, in the end.

Thank you for reading this article. Let me know in comments if you have some other definition of startups worth mentionning and to your opinion what are the main characteristics of startups.

For this post, I got a lot of information from this great question on Quora : What is the proper definition of a startup?

Also, this post from Paul Graham is pretty great: Startup = Growth