The government defines a startup as any enterprise that has revenue under 100Cr and less than 10 years of operations. It has no clause about the type of work and area of operations, nor does it account for disruption or innovation.
There was always a clear distinction between startups and SME’s and large businesses, over the years the definition has gained more clarity.
In today’s world Youtubers, Influencers and Bloggers are gaining rapid popularity, with startups already leading the movement, the definition is shrinking and merging and turning into a blob.
Let me clarify, I am not defining an entrepreneur here. A person who sets up a business or businesses, taking on financial risks in the hope of profit is an entrepreneur”. Not all enterprises are startups but all founders, YouTubers, bloggers, Influencers, Freelancers are entrepreneurs.
To quote Paul Graham
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.”
That’s all that makes a startup different, the ability to project growth. It doesn’t mean to get a lot of customers or have a lot of downloads but to grow at a pace that sets them apart from the whole ecosystem.
This can be further broken into a few more aspects, making the definition more contextual with how businesses have evolved, the definition also stands to add a few extra factors.
Unknown or non-established Business Model in a specific domain and market. A cafe that lets you buy coffee for money is a business if a cafe offers you free food in exchange for a credit score or your data, that is a startup. This business model is how you can define a potential startup.
The ability to create High Impact, here majorly via employment generation, solving a problem affecting a larger population. A taxi booking agency would not be a startup. Ola not only has a new business model but also generates massive employment. They enable people to own and become revenue generators, adding to the economy, creating a larger impact. Ola is a startup
Growth with scalability in both valuation as well as several consumers. A business grows 10X in 10 years. A startup should show a 10X growth in a year. Businesses focus on sustaining and building revenue and profit. Startups focus on replication and scaling at a cost of profit. One can debate it because “profitability” is missing.
Innovative or the Ability to innovate though not a key metric is one such factor. The ability to rent vehicles always existed in cities. Bounce enabled doing the same using technology innovating both at a business model level as well as with technology.
One differentiating factor is the founder as well, unlike businesses where the vision is aligned to the books and profit. Founders drive startups with a vision to grow, impact and solve larger problems. Startup Founders hire the best and the brightest. They always search for a repeatable and scalable business model. When they find it, they start to look for more venture capital to boost their businesses. They build ecosystems around them, like silicon valley or Bangalore for instance. This sets them apart from most other businesses that focus on clusters for economic gain.
A startup is a passion, with drive, focused on an idea. It navigates through uncountable difficulties for finding a way to success — overcoming even impossible-to-climb barriers. But, actually, this crazy ride somewhere somehow ends.
The question is, when?
Where is this turning point, when a startup simply becomes like any other company, losing its “startup” status?
The Easy answer by the government is 3 Years or 5 Cr of Revenue. Gurus claim it to be the mark of 100 Employees or in some cases when they raise a Series B fund.
Startups not just stand out in the cool factor but in the way they define the business. Their Growth, journey, disruption, the team all play a factor in defining them.
Above all Risk-taking is an essential part of developing entrepreneurship, startups take more risk than most.
What I personally feel, If you’re not in a search of large investments and you’re no longer sacrificing your personal capital to survive, you’ve probably outgrown the startup status. There is no telling if you will ever stop being a startup at heart, but at that stage, you stop working like one.