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What is the difference between a startup and a business nowadays? I can start a business without an investment round, but not a startup? Is it a startup if it

by reidjs 4y ago

What is the difference between a startup and a business nowadays? I can start a business without an investment round, but not a startup? Is it a startup if it involves tech, a business if not? What if they use SOME tech, but not necessarily innovative tech? Or is this one of those 'you know it when you see it' kind of things? Has the term startup become a buzzword like "optimize" or "synergy"? Seriously asking, not being snarky. edit: thank you, for the responses that clarifiesthe distinction

tiledjinn 4y ago
Scale and speed of scale. Planning for fast growth. Most small businesses do not plan to grow very quickly.
- praptak 4y ago
  Also the dual is true - bigger risk of failure is acceptable. Normal business investor typically cares between bankruptcy and having merely poor RoI. Startup incubators would rather have their 999 startups go broke and the 1000th become "next Google" than have average RoI on all 1000.
gnicholas 4y ago
According to PG, a startup is a company designed to grow fast. [1] Again, this is a bit at odds with the advice to be frugal. It's not that you can't do both, it's that you have to strike a balance because they are in many ways at the opposite ends of a spectrum. 1: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- throwaway29812 4y ago
  Right, and most often that growth is tied to a digital product that can scale to infinity with little additional capital needed.
gopalv 4y ago
> I can start a business without an investment round, but not a startup? The answer around me seems to be that a startup comes out of an idea without the capital worked out. That the equity they have to offer is worth nothing, unless they execute the plan with money they don't have. If you have the capital worked out, you can go ahead into the business phase of the process right away, where profitability is king and there's no plan needed to answer the "how to raise more?" question. A lot of what we associate with startups is the justifications towards raising and a lot of what we see from a "business" is geared towards margins. For instance, better margins by extracting more profits on a lower revenue is better for one, but looks bad for the other.
unixlikeposting 4y ago
the word "startup" has been a buzz word since ~2012 from my perspective. Ever since I saw established companies start to describe their approach as becoming more "startup-like".
- fijiaarone 4y ago
  Startup means a business that is "starting up". People have become so divorced from reality that words don't even have meaning anymore.
  - wizzwizz4 4y ago
    Computer means a person who "computes". Photo-shop means a shop that "develops photos".
NikolaNovak 4y ago
My colloquial understanding is that Startup is meant to grow fast, Business is meant to grow slow. Some of the causes and effects: 1. New business may have a proven business model, customers, product, market. Startup may have to find or create any of those 2. New business may have some capital to build/invest itself (I've worked in a restaurant, saved up, now opening my own). Startup is based on idea/people/work, but likely has no internal capital 3. Both have risk; but in some ways New business risk is known & understood. Startup's risk may be as undefined as their product/market. As frequently used, there's also a 4. Expectation of profit / failure rate. A new business would be happy to succeed with small profits, certainly very much over bankruptcy/shutdown. Startup ecosystem/expectations are built around fail or succeed wildly.
- rising-sky 4y ago
  I think the first point is probably the most differentiating characteristic. Startups are typically about innovating, doing something differently from what's expected or the norm. Typically, but not always, this leads to disruption in the domain if the startup is successful. But it should always be about innovating or attempting something different in its domain, otherwise it's just another business.
strangattractor 4y ago
The grow fast part is key. If you can out spend your competition and out grow them it is much easier to monopolize your market. That is how you become a FAANG. Not all businesses have that potential however - which is why so many fail. Failure in this case does not necessarily mean the business is not successful - simply not successful enough.
personjerry 4y ago
Joel Spolsky explains it well in this article: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
munificent 4y ago
I'm not a business person, but I always assumed "startup" meant that you take venture capital. That in turn means you now have a financial need to grow to a certain size for the investors to recoup.
lightbulbish 4y ago
I like a definition from Steve blank (I think). A startup is an organisation in search of a scalable, profitable and repeatable business model. (Scalable is relative but at minimum exponential. Linear growth does not a startup make.) The above definition has helped me delineate between a tech smb and what one feels is a “startup”.

by reidjs 4y ago

tiledjinn 4y ago

Scale and speed of scale. Planning for fast growth. Most small businesses do not plan to grow very quickly.

praptak 4y ago
Also the dual is true - bigger risk of failure is acceptable. Normal business investor typically cares between bankruptcy and having merely poor RoI. Startup incubators would rather have their 999 startups go broke and the 1000th become "next Google" than have average RoI on all 1000.

gnicholas 4y ago

According to PG, a startup is a company designed to grow fast. [1] Again, this is a bit at odds with the advice to be frugal. It's not that you can't do both, it's that you have to strike a balance because they are in many ways at the opposite ends of a spectrum. 1: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

throwaway29812 4y ago
Right, and most often that growth is tied to a digital product that can scale to infinity with little additional capital needed.

gopalv 4y ago

> I can start a business without an investment round, but not a startup? The answer around me seems to be that a startup comes out of an idea without the capital worked out. That the equity they have to offer is worth nothing, unless they execute the plan with money they don't have. If you have the capital worked out, you can go ahead into the business phase of the process right away, where profitability is king and there's no plan needed to answer the "how to raise more?" question. A lot of what we associate with startups is the justifications towards raising and a lot of what we see from a "business" is geared towards margins. For instance, better margins by extracting more profits on a lower revenue is better for one, but looks bad for the other.

unixlikeposting 4y ago

the word "startup" has been a buzz word since ~2012 from my perspective. Ever since I saw established companies start to describe their approach as becoming more "startup-like".

fijiaarone 4y ago
Startup means a business that is "starting up". People have become so divorced from reality that words don't even have meaning anymore.
- wizzwizz4 4y ago
  Computer means a person who "computes". Photo-shop means a shop that "develops photos".

NikolaNovak 4y ago

My colloquial understanding is that Startup is meant to grow fast, Business is meant to grow slow. Some of the causes and effects: 1. New business may have a proven business model, customers, product, market. Startup may have to find or create any of those 2. New business may have some capital to build/invest itself (I've worked in a restaurant, saved up, now opening my own). Startup is based on idea/people/work, but likely has no internal capital 3. Both have risk; but in some ways New business risk is known & understood. Startup's risk may be as undefined as their product/market. As frequently used, there's also a 4. Expectation of profit / failure rate. A new business would be happy to succeed with small profits, certainly very much over bankruptcy/shutdown. Startup ecosystem/expectations are built around fail or succeed wildly.

rising-sky 4y ago
I think the first point is probably the most differentiating characteristic. Startups are typically about innovating, doing something differently from what's expected or the norm. Typically, but not always, this leads to disruption in the domain if the startup is successful. But it should always be about innovating or attempting something different in its domain, otherwise it's just another business.

strangattractor 4y ago

The grow fast part is key. If you can out spend your competition and out grow them it is much easier to monopolize your market. That is how you become a FAANG. Not all businesses have that potential however - which is why so many fail. Failure in this case does not necessarily mean the business is not successful - simply not successful enough.

personjerry 4y ago

Joel Spolsky explains it well in this article: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

munificent 4y ago

I'm not a business person, but I always assumed "startup" meant that you take venture capital. That in turn means you now have a financial need to grow to a certain size for the investors to recoup.

lightbulbish 4y ago

I like a definition from Steve blank (I think). A startup is an organisation in search of a scalable, profitable and repeatable business model. (Scalable is relative but at minimum exponential. Linear growth does not a startup make.) The above definition has helped me delineate between a tech smb and what one feels is a “startup”.