How long is a company considered a startup? Is it the time, revenues or size?
A good read for anyone wanting to understand why startups behave the way they do.
Answer by A Quora admin:
Answer by A Quora admin:
There is no one definition of a startup. But, one of the gurus in this field, Steve Blank, offers this definition:How long is a company considered a startup? Is it the time, revenues or size?a startup is an organization formed to search for a repeatable and scalable business model.
Think of a startup as a lab. A lab to experiment a variety of business models until one of them sticks & scalable. A researcher at the lab might try out a variety of combinations until she finds out the winning drug formula. With each formula she performs a variety of tests - first in the lab and if that works in the broader world [field trials etc].
Once she discovers the right formula that passes all the tests and cures the disease, she will take that to the engineers who will then build a large manufacturing unit that will mass produce that drug. At that point, her job is over and she can go and start discovering another drug.Discovering a drug
This is what happens in a startup world. You are discovering for that right "drug" [solution] for that right "disease" [problem]. Facebook helped fight the disease of not being able to stay in touch with your friends and family who have moved far. Google helped fight the disease of not being able to find the right info on the web.
In their initial stages, both companies were not sure of their market and not sure of how they would make money. It took a few years for their business model to fall in place. That period of time is known as the startup phase.
Once the drug is discovered and tested, it can be mass produced in millions and billions. That's how startups grow rapidly - with the right drug they can have explosive profits.Properties startups
- Most startups fail: People outside the field tell this with a dramatic effect as though they have solved Fermat's last theorem. Of course, most experiments in the lab fail. Most pharmacologists never discover a blockbuster drug. Does that mean it is not worth pursuing that goal? Any path that is worthy in life will be riddled with failures.
- There is luck, but can be improved with agility: Some researchers hit upon the winning experiment by chance. While others slog for years patiently looking for their combination. In any discovery, there is a huge element of chance and luck. However, this factor can be a bit reduced by doing a lot of experiments and improving from each. That can substantially improve the probability of finding the winning drug. However, many startup founders are too stuck with their initial idea and never experiment.
- There is failure and there is pivot. What happens when a chemist tries out a combination and that doesn't work? He tries another. He might not bother about that "failure" too seriously. It will just go into the lab observation notebook. When you are in the experiment mode, you will not get your desired result in all but one experiments. However, after each trial, he can fine tune his next experiment based on previous experiments. If including sodium gave only partial results, maybe move down the table and try potassium? In the same way, startups keep pivoting after each trial. That's not failure. That is the nature of the system.
- Keep testing. Chemists might write their reactions in paper and plan. But, they don't stop at that. They will do the experiment to see how the reaction actually pans out. And if that works in the lab, they will do further tests in the real world. In the same way, startup founders needs to keep pushing new products & features and keep testing. You cannot just assume something would work based on theory.
- Startups do get acquired even when they don't make money. This is something that the outsiders get so confused about. Underpaid journalists in popular media will scowl at how these darn startups get bought out without generating profits. Let's say you have hit upon that winning drug and have not built a full factory yet. Is the drug valuable, still? Of course. Because, making the factory is quite straightforward for a company with that expertise. But, making the winning drug combination is not. That's why Facebook bought Whatsapp and Instagram before they made a lot of profits. Both companies already had a strong winning drug, while Facebook was good at building the factories.
- In fact, you don't even need to produce the winning drug in some cases. If you are quite advanced in the process and have done multiple trials - you might still get acquired by a bigger company who would build on that process. While the common public would not know about the value of that midstage product, trained eyes can.
In summary, a startup is a lab that is attempting to produce a money-making enterprise. As long as it is on track to produce a rapidly scalable company, it can be called a startup [99% of small businesses are not startups - they are not built as labs nor can have explosive growth with a winning formula].
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