Everyone seems to have an opinion of what exactly constitutes a startup. Everyone I have spoken with has a different criteria for what is a startup and what isn’t. Here are some of the criteria:
- Less than five years old
- Less than ten years old
- Can’t be public
- Can be public
- Pre-profit
- Pre-revenue
- Post-profit
- Post-revenue
- Less than ten employees
- Less than 100 employees
- Less than 1,000 employees
- Has a functional beta
- Doesn’t have a beta (either pre or post)
- Lifestyle companies
- No Lifestyle companies
It goes on and on…
Who is to say which criteria are the best? Well, I will give it a go and since I am a huge fan of simplicity. I propose the following rules:
- Any company that is less than five years old
Done!
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I say a startup is any company that doesn’t have an established revenue stream and a defined way of finding new sources and so continues to scramble month-to-month to find new clients and customers. You can do this for fifteen years and still be a startup. You can get over this hurdle in a month and move on to the next phase.
I like the one simple rule approach, much more inclusive and easier to determine… Now on to re-define exit
If Startup = <5yr old, is an exit event required within 5yrs (e.g. exited by becoming a poorly run unprofitable company, exited by being acquired, exited by ??)
Michael – sounds like the definition of poor planning, not the definition of a startup.
Josh, I agree with you. A startup can’t be defined as pre-revenue. They can still easily fail post-revenue.
Also, Michael, might you be talking about pre-profits? In that case, how would you determine who is profitable and who isn’t? They certainly don’t provide that type of information willingly.
Echoing what Josh said…
Michael, I don’t think it is true that you can call the company you described a startup after 15 years. What that sounds like to me is a poorly run small business. Maybe is has some elements of startup culture, like scrappiness – but those traits do not a startup make.
As to “exits”, here are the options I see:
1. Fail and close up shop
2. Profitable self-sustaining business (lifestyle)
3. Profitable high-growth business (growth company)
4. Acquisition
5. Merger