What Is a Startup Company, Anyway?

What is a startup? Let these startup founders clear it up once and for all.

April 7th, 2022   |    By: Emma McGowan    |    Tags: Growth, Success, Market, Customers, Employees, Planning, Lean, Staff, Product/MVP

From single founders with no team to some of the biggest tech companies in the world, our definition of “startup” is extremely broad — and very unclear.

While most people wouldn’t put Uber and Facebook in the same category as the apps and games and services being hatched in co-working spaces across the country, they’re all still referred to as startups (and sometimes seen as "start-ups").

So what is a startup company, anyway?

Perhaps the most popular definition of a startup meaning is from Eric Ries, the creator of the Lean Startup methodology:

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

What is a startup banner

Startups.com Co-Founder and CEO Wil Schroter has his own definition of what a startup company is.

“A startup is the living embodiment of a founder’s dream,” Wil says. “It represents the journey from concept to reality. It is one of the few times when you can take something that is only a dream and make it a reality, not just for yourself, but for the entire world.”

Both startup owners, definitions of what a startup is are examples of big-picture thinking; a big-tent approach to defining “startup.” But there’s another side to the definition of “startup:” the nitty-gritty. The details. The little things that make one company a startup and another a small business and another a corporation.

So let’s start with these broad, philosophical definitions and drill down into the specifics. By the end of this article, you’ll be able to answer definitively that big question:

What is a Startup Company?

A startup (or start-up) is a company typically in the early stages of its development. These entrepreneurial ventures are typically started by 1-3 founders who focus on capitalizing upon a perceived market demand by developing a viable product, service, or platform.

During the early stages of launching, startups are usually self-funded by members of the founding team (aka the startup owners) — though 66% of startups secure venture capital funds through an investor or take out a loan to help fund their new business.

That’s technically-speaking. But founders know defining a startup is SO much more complex than that. It's not that a founder possesses unusual innate ability or is part of a highly skilled elite group (some are) but they must have some intellectual or artistic technique to contribute or they wouldn't be crazy enough to create a startup in the first place.

What is a startup

A startup company is… focused on growth.

Startup vs Small Business: One feature that most people seem to agree on for the definition of a startup is a focus on growth. Small businesses may be happy staying small businesses forever, but a startup doesn’t want to stay small.

“To me a startup is any company that has a goal to grow and scale, usually quickly and usually using technology to do so,” Ian Wright, founder of Merchant Machine, tells Startups.com.

“All startups by their very nature will start out being small businesses, but not all small businesses are startups. The difference with startups is that it’s their goal to no longer be a startup at some point in the future, while many small business owners are more than happy for their small businesses to remain small businesses.”

A startup company is… solving a problem.

Sometimes the best way to figure out a simple definition of a big concept is to think about how you’d explain it to a child. Jochem Wijnands, the Founder of a startup that was acquired by Apple in 2014 and TRVL.com explains the definition of startup this way to his eight-year-old son:

“A startup is a modern version of an inventor. It experiences a problem and then tries to solve it with ingenuity. A successful startup typically wants to solve a problem and make the world a better place.”

Stephanie Caudle, the Founder of Black Girl Group, agrees.

“A startup is a company that solves a problem,” Stephanie says. “If your company isn’t solving a problem, your company is simply an idea.”

A startup company is… a job you can’t live without.

A job is often just a job, when you’re working for someone else. But when you’re the startup owner and running it? It’s much, much more.

“In my experience, a startup is a job you cannot quit, that does not pay, and which you cannot live without,” Sacha Nitsetska, Founder and CEO of Mentorforward, tells Startups.com.

“Ideally, it is also an organization that is doing something that has never been done before, and that has the potential to change the world. Growth numbers and the rest are just an output from the above with some good execution, right tactics and great advisors added in just the right amounts.”

A startup is a job you can't live without

A startup company is… more questions than answers.

One of the hallmarks of a startup is the willingness to push boundaries and conduct lots of experiments. Xiao Wang, the Co-Founder and CEO of Boundless, believes that those questions and experiments are essential if a company is going to claim that startup definition.

“A startup is a company that has more questions about its business model and sustainability than answers,” Xiao says.

“It does not yet know how it will operate at scale, both to its customers and its employees. The focus is on experimentation — continuously testing, iterating, and learning. This is independent of number of employees, revenues, or whether or not it’s publicly traded.”

A startup company is… searching for product/market fit.

Some businesses launch with a product/market fit link already built into their business plan. A bagel bakery in Brooklyn, for example, probably already has a pretty good idea of who their market is and what they’re looking for.

But a startup, Joshua Feinberg — Chief Thought Leader, Vice President, and Co-Founder of SP Home Run Inc. — believes, is still searching for that magical slot they can slip into.

“A startup is a company that’s searching for product/market fit: trying to identify its ideal customers, which products and services those ideal customers purchase, at what price points, and how frequently they make those purchases,” Joshua says.

“Besides raising capital when needed, startup founders spend a lot of time tracking and trying to improve a handful of core metrics including average customer lifetime value (LTV), cost of customer acquisition (COCA), and average sales cycle length.”

A startup company is… filling a gap in the market.

Nate Masterson, the Marketing Director of Maple Holistics, thinks the definition of a startup starts with the goal of fill a gap in the market.

“Technically speaking, a startup is defined as any newly formed and fast-growing company or new business that aims to fulfill the needs or a gap in a relevant marketplace,” Nate says.

A startup is filling a gap in the market

A startup company is… changing the ways things are traditionally done.

While many people associated “startup” with “young people,” young founders actually aren’t an essential element to the definition of startup. Take it from Mark Winokur, Founder and CEO of Workforce First Aid and Safety.

“The amazing thing about the term “startup” is that it really has no defined boundaries,” Mark says.

“Sure, certain characteristics come to mind when the word is brought up – millennial, tech, major funding, etc. But in reality, a startup can fall under that umbrella or be very far outside of it.

“For instance, I’m a 70-year-old entrepreneur with a startup in a very traditional industry,” Mark continues.

“I’m not sure there are many boxes that you can lump startups into. Founders come in all ages, from all backgrounds, while companies can still be considered startups for quite awhile after founding with no hard and fast rule as to when you stop being a startup (maybe when you stop innovating?).

I do believe there is a common thread connecting most startups, though: a mission or goal to disrupt, change, or enhance, the traditional mindset of whatever industry they’re in.”

A startup company is… starting from scratch.

Already making money from the get-go? Nailed your product-market fit? Then you’re not a startup, at least according to Geoff Roberts, Co-Founder of Outseta.

“A startup is any new business venture that’s starting from scratch and trying to build something of value — when I say ‘scratch’ in a for-profit setting, I mean that the business has no revenue,” Geoff says.

“I consider businesses to be in the startup phase from zero dollars in revenue until they have found product market first, a valid business model, and replicable revenue generation strategies. Once those criteria are met, the new business is no longer a startup and instead moves to the scaling phase.”

A startup company is… a company in its early stages.

Scott W. Johnson, the owner of WholeVsTermLifeInsurance.com, has a very practical answer to the question “what is a startup?”

“A startup is a newish company that is the early stages of branding, sales, and hiring,” Scott says.

“Startups often require employees to do many different job functions, with less robust tools, no name recognition, little to no income, sometimes with little planning, often under impossible circumstances.”

A startup is not successful - yet

A startup company is… not successful — yet.

“Success” is often subjective — one founder may see it as raising a round, while another might see it as feeling fulfilled at work. But Sarnen Steinbarth, Founder and CEO TurboTenant, thinks that not being successful yet is key to the definition of a startup.

“Startup implies a phase of the company where success is not yet determined,” Sarnen says.

“For example, Airbnb was a startup with fast-growing, aspirational goals. They are no longer a startup because they are past the phase of ambiguous success.”

A startup company is… a home for “the crazy ones.”

Most everyone agrees that one absolutely essential part of a startup is the team. For Chris Kane, Co-Founder and CEO of Chek, that team really defines what a startup is.

“A startup is the largest group of rebels, rule-breakers, and unconventional thinkers that you can find, convince and inspire to create breakthrough change in the world,” Chris says.

“These select people are in truth, as Steve Jobs put it, ‘the crazy ones.’ They view the world from a different angle and aren’t afraid to fail. They disregard ‘what is’ for ‘what could be’ and risk their livelihoods to achieve that goal, no matter the odds.”

A startup company is… a mix of emotions.

A feeling in the pit of your stomach. Is it fear? Is it excitement? Yup — it’s a startup.

“Metaphorically speaking, a startup is that moment of hesitation you feel before facing your biggest challenge,” social media influencer, business advisor and Co-Founder and CEO of Bell + Ivy, Cynthia Johnson, says.

“Whether it is the pit in your stomach that aches before you ride a rollercoaster or the nerves that flood your body before meeting someone new, say on a first date, a start-up embodies these intense emotions of fear, nervousness and uncertainty.

A startup may also be the frustration one feels after they go on the rollercoaster and meet that person and think, ‘Hey that wasn’t so bad.’

“At the same time, a startup is also the joy a student feels walking into their first day of class, relaxed and rejuvenated from a long, exciting summer, ready to share their summer memories with their friends,” Cynthia continues.

“These mix of emotions is exactly what embodies a startup and the unpredictability and loss of stability entrepreneurs temporarily face.

But above all, a startup is a process in which all the above emotions create the overarching journey for them to eventually be recognized as a successful company.”

Passion led us here

A startup company is… a company with few employees.

For Stacy Caprio, Founder of Accelerated Growth Marketing, the definition of a startup is clear — and it’s tied to numbers.

“A startup is a company with under 100 employees that is not yet publicly traded,” Stays says.

“A startup is not a company with a large bureaucracy, it is not a company with over 100 employees, and it is not a company without a strong culture and tight-knit community.”

Alex Winston, Founder and Managing Director of PPC Protect, agrees that startups have a low number of employees, but he pegs it even lower than Stacy does.

“To me, a startup is a company that is innovative and solves a unique problem people have — so no corner shops or generic restaurants!,” Alex says.

“It’s also less than two years old, has a turnover of under $250,000/year and less than 10 employees. Anything bigger than that and you’re starting to enter the small business / SBE arena.”

A startup company is… working toward an innovative common goal.

On the more philosophical side of things, Alexandra Isenegger, Founder and CEO of Linkilaw, believes that the definition of startup can be found in the goals of the people working for it.

“A startup is an organization where individuals are working together towards a common goal, and that goal is usually highly innovative in nature,” Alexandra says.

“A startup is not a place where people work out of beanbags, a startup is not a place where everyone dresses the same, a startup is not a place where people use buzzwords like ‘blockchain’ or ‘AI’ without really knowing what they mean. Or at least, most startups are not like that – but you’ve gotta have a few to build up that reputation.”

A startup company is… lean and adaptive.

In figuring out the definition of a startup, there’s a lot of talk about what a startup isn’t. That’s because there are so many stereotypes about startups, most of them promoting the idea that they’re just a place for lazy millennials to spend other people’s money while they play foosball games. Jacob Fenuccio, Founder and CEO of Fractal Solutions LLC, thinks that’s a garbage view.

“A startup is a young, ambitious, growing collection of people with momentum around an idea or innovation,” Jacob says.

“A startup is not fully formed or complete but still vigorously pursues greatness through a lean and adaptive endeavor. Startups are heavily defined by their actions and execution, not just their ideas.

A startup is not any company with a ping pong table, cool office decor, employee outings, loose regulations, and/or casual behavior. A startup is about actionable innovations around ideas.”

A startup is lean and adaptive

A startup company is… a company with a small user base.

For Dary Merckens, CTO of Gunner Technology, a startup is a company that hasn’t yet reached critical mass.

“Frankly, a startup is any new business that hasn’t reached critical mass yet run by one or more individuals whose primary work-related goal is the growth of that company,” Dary says.

“Those are the two critical factors to me:

1.) the user base isn’t large enough yet that the product can be considered a proven concept and

2.) it has a dedicated team (which could be a team of one) whose primary focus is the development of the product.

At some point, the idea either takes off and it moves from startup to proven concept (a la Facebook growing to a million users) or the team deprioritizes focus on the idea and it moves from startup to side project (a la countless ideas that have flamed out).”

A startup company is… completely independent.

Attached to a larger company? Then you’re not a startup, according to this startup definition from David Stephenson, Founder of Grafted Clothing.

“A startup is a venture into business,” David says.

“It is a completely independent company with no ties to already established businesses. Therefore funding is a major hurdle with crowdfunding platforms being a popular method of acquisition. Otherwise angel investors or years of saving (in my case) are options.”

A startup company is… searching for a sustainable business model.

Another popular definition of startup comes from Steve Blank, who shares expert advice and says a startup is “an organization formed to search for a repeatable and scalable business model.”

Steve Benson, Founder and CEO of Badger Maps, uses that definition to guide his own startup definition.

“A startup to me is when a person or group of people are trying to figure out an idea and then executing that idea with the goal of becoming a sustainable business model,” Steve says.

Having a sustainable business means you are making more money than the business takes to run. You are not a startup anymore once you have a sustainable business, and your job then becomes to improve your key metrics over time, like revenue and profitability.”

A startup is searching for a sustainable business model

A startup is… about making change.

We love to talk about “disruption” in the startup world, but before that became buzzy (and subsequently cliche), there was another word that people were already using: change.

“A startup is the conscious decision to form a group of people with the sole purpose of bringing about change in the real world,” Ross Palmer, head of digital marketing for Lab Society, says.

“This change means creating a money-making, value-adding asset where there was none before. The idea is to enrich not only the people committed to the vision, but the world at large in the process!”

A startup company is… prototyping a concept.

“When you are putting your ideas out into the world — getting feedback from potential customers — you have a startup,” Jeff Hittner, Founder of Your Project X says.

“The hours you put in do not define a startup. Whether or not you are making revenue does not define if you are a startup. In fact, a founder may feel they have a startup and their customers may beg to differ.

It doesn’t matter. What’s important is that the founder is prototyping a concept — taking action in the world – and that people are responding to it.”

So what is a startup?

As you can see, the definition of a startup is broad. It covers philosophical distinctions, technical ones — even some hard and fast numbers. But while there are a lot of factors that go into the definition of a startup, we’re going to leave you with this one from Ryan Rutan, Startups.com’s Chief Innovation Officer.

“A startup is a company that is trying to do something new or novel,” Ryan says.

“It doesn’t have to be tech. A ‘small business’ is a company that follows a well prescribed model. Therefore, an accounting consultancy is a small business.

But an accounting consultancy marketplace to answer questions via phone for accountants with down time? That’s a startup.”

Some final thoughts (in case you haven't had enough yet) — Successful entrepreneurs run startup companies (or early stage companies) in the business world that see rapid growth due to a solid business plan and a business strategy that is executed brilliantly. It sounds simple enough, but it isn’t always that easy. Even if a business plan is perfect, that doesn’t guarantee the success of a startup. Without proper startup funding (whether by the founding team or venture capitalists) and a startup ecosystem built to take on every obstacle, not even the trendiest startup culture can hold the business together (and in many cases, even those things aren’t enough). It takes endless amounts of tenacity and persistence to create successful entrepreneurs who can bring a business idea to fruition.

**Check out our podcast!** We dive deep into the problems startup Founders face every day to unpack what's really at stake and how to actually solve them: Startup Therapy Podcast

About the Author

Emma McGowan

Emma McGowan is a full time blogger and digital nomad has been writing about startups, living with startup people, and basically breathing startups for the past five years. Emma is a regular contributor to Bustle, Startups.co, KillerStartups, and MiKandi. Her byline can also be found on Mashable, The Daily Dot's The Kernel, Mic, The Bold Italic, as well as a number of startup blogs.

Follow her on Twitter @MissEmmaMcG.

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