What Is A Startup?

In the last 10 years ‘startup’ is one of the fastest growing words in popularity. Most people were not knowing about the word ‘startup’ just a decade ago. Startups like Uber, Stripe and Paytm, etc have made this word famous. Government programs like ‘Startup India’ have also increased their popularity. In spite of its huge popularity, no one seems to know the exact meaning of the word ‘startup’.

Interestingly people who work in big startups also do not know whether they work in a corporation or a startup. When I joined Paytm (India’s highest-valued startup at the time of writing) as Vice President in 2018, I met a lady who was one of the earliest employees in the company. She asked me if Paytm was still a startup even though it had thousands of employees. For her startups meant small fast growing companies.

Most people do not have clarity on what is a startup? Some people believe that every small company is a startup. Others believe that every new organization is a startup. Some others believe that all medium and small businesses are startups. Some people believe that as freelancers they are really startups. Some believe that startups are only about technology. Thus there is a lot of confusion on the meaning of the term ‘startup’ among people.

Steve Blank, author of ‘The Startup Owner’s Manual’  and a global startup mentor has provided the following definition of a startup :

A startup is a temporary organization in search of a scalable, repeatable, profitable business model.

He says in his book that startups are not the small versions of large companies. Startups are different from big corporations. Startups want to find a scalable, repeatable and profitable business model. Startups according to him are temporary organisations. Either they grow big and become corporations or they die. Thus startups cannot always remain a startup.

Steve’s definition is good but it does not cover some bigger startups who already have found a scalable, repeatable and profitable business model but still are called startups by people in industry and media.

Also, Steve’s definition does not cover new ventures by existing corporations even though they may be acting like startups. For example, Reliance Jio in India disrupted the telecom industry in India even though it was the last entrant in the industry. Reliance is the biggest private sector company in India (at the time of writing) but its venture Jio acted like a startup and dislodged the incumbents.

I personally like the definition provided by Eric Ries, the author of ‘The Lean Startup’. 

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

Eric’s definition is agnostic to the size of a startup. It is also agnostic to the lifecycle stage of a startup. He simply focuses on delivering a new product or a service under conditions of extreme uncertainty. If we take Eric’s definition we will be able to justify Uber, Paytm and Reliance Jio to be startups even though they are not small and temporary organizations.

Over the last 3 years, I have met hundreds of startup founders and have formed my own definition of a startup. According to me, a startup can be defined as :

One or more individuals trying to solve problem(s) by creating product(s) or service(s) in a scalable way.

My definition focuses on problem solving. I found that successful startups focus on solving the problems of users. Also, successful startups find a scalable solution to these problems. A startup can be a company, an organization or even an open source project. Thus I have defined a startup to be a group of individuals. The individuals may be working in a formal or informal setting. We have seen how Wikipedia and WordPress have changed the world in spite of their open source roots.

Startups are the disruptors. In the 21st century, change and uncertainty are only increasing. Humans are facing newer problems. Whether it is space exploration or the development of solutions to COVID, startups have now become critical to the growth and well being of our society.  Whatever the problem, a startup would always have a scalable solution to it. Thus startups are here to stay.

Author: Saurabh Jain (Follow him on Twitter : @skjsaurabh)


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