5 months ago

Not every new company is a startup and that's alright

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In the age of Shark Tank and Tech Unicorns, where every fledgling company is hailed as the next big thing, it seems we've concocted a special category just for them: ‘startups’. Although in some cases what may sometimes seem like a struggling and confused venture can emerge as the leader of a new category that never existed before. This is the power of innovative companies that solves a problem at scale. The celebration of these innovative companies has given rise to a distinct category known as ‘startups’. However, amidst this celebration, it is crucial to establish a clear understanding of what truly constitutes a startup. The term is often used liberally, particularly in the context of newly founded companies led by youthful entrepreneurs. Yet, it is essential to recognise that not every new venture qualifies as a startup.

Contrary to popular misconception, a startup is not merely a new website development company or a social media design agency with superhero names. While it's true that a venture may be initiated by a visionary founder, labelling such endeavours as startups can lead to misrepresentation and potentially divert the company from its intended trajectory.

So what's the definition of a startup? The best one, it seems, is given by American entrepreneur, author and father of the lean startup movement Steve Blank. He said that a startup is an organisation formed to search for a repeatable and scalable business model. He empasised 'search' during a lecture he gave at a university. If the industry already has a good answer to a problem, it shouldn't search for it.

This means a true startup embodies a unique set of characteristics that extend beyond mere novelty. It is distinguished by its pursuit of innovation and its potential to scale rapidly to provide for consumer's unmet needs. It should seek to get a stable business model as well as repeatable process to deliver solutions to its intended consumers. "Startups'' are temporary labels to a new venture, not necessarily all new ventures. However, many aspiring entrepreneurs mistakenly adopt the startup label without adhering to the fundamental principles that define this category.

Due to the recent growing hype by adopting this tag of 'startups', for instance, a founder may be fixated on external funding and other glamours of founding a business; rather than the business and its intricacies such as fixing the product, team, strategy and everything else first. Adopting this 'startup' might mask the real barriers to a company's viability. Additionally, indulging in flashy initiatives, PR or using buzzwords can detract from the core mission of a company, diluting its focus and hindering its progress. This practice not only risks the financial stability of the venture but also compromises its long-term viability.

Moreover, a true startup is not defined solely by the age or background of its founders but rather by its commitment to addressing unmet market needs and delivering innovative solutions. Therefore, it is imperative for entrepreneurs to refrain from hastily adopting the startup label and instead focus on cultivating a good product, building a team, validating market demand, and executing a strategic plan for sustainable growth. Building a business is extremely tough on its own. Entrepreneurship requires a huge amount of sacrifice and dynamism. According to Naval, founder of Angellist and revered entrepreneur, "If you're more passionate about founding a business than the business itself, you can fall into a ten-year trap. Better to stay emotionally unattached and select the best opportunity that arises."

By embracing a nuanced understanding of what constitutes a successful business and adhering to the essential principles of entrepreneurship, aspiring founders can position their ventures for long-term success and meaningful impact in an increasingly competitive landscape without ever becoming a 'startup'.

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