What is a Startup Company?

When most people hear the word “startup” they think of a company that is small, without much momentum. Essentially, a company that is well, just getting started. While it’s understandable to think this is the case, it’s not an accurate description of what a startup company truly is.

The classic definition is a tech company with fewer than 100 people but there is more to it. Steve Blank, a business guru, defines it as “a temporary organization designed to search for a reputable and scalable business model.” In today's day and age, many people might argue that there is no longer a standard definition when it comes to the term “startup.”

The phrase “startup” first appeared in a 1976 Forbes article in reference to data processing. After the late ‘90’s, thanks to the dot-com boom, the term began popping up everywhere, thus becoming synonymous with tech companies, which is why most people think of tech startups as being the only kind of startup company out there.

Much like some of the businesses we work with, JMGPR is nimble like a startup so we can adapt to the changes that happen quickly within the companies of our startup clients. Our client relations are focused on personalized experiences, so that the people we work with always feel that we are an extension of their team. We also put a large emphasis on employee culture like startups do.  

If you’re wondering exactly what it takes to be considered a startup, companies that check off any of the following fall under the definition:

●      Searching for a product and a business model.

●      Are comprised of 30 employees (or less).

●      Financed via bootstrapping, outside investors, loans.

●      Not considered corporations or “mature” yet. The company is not ready to be bought out or is in the midst of hockey stick growth (a revenue growth pattern that outlines where the startup begins, their first few years hustling, and then a turning point).

●      Focused on rapid, scalable growth.

●      Formally exhibits or adopts aspects of the startup culture.

A startup company should not be confused with a small company as they are not the same. One of the biggest differences between the two is the intention for growth. The founders of start-ups are looking to make a significant impact on the current market and grow as quickly as they can. This is why startups are often in the technology field.

Small businesses are more cautious when it comes to growth strategies and are focused on building profits before considering any type of expansion. They are focused on long-term, stable growth that will in turn create a sustainable, long-lasting business. It is a business model suited for those who have a lower tolerance for risk.

Another differentiating factor between the two is vision. With startup companies, especially in the technology space, the founders are not only focused on creating a product, but also being a disruptive force within their industry, essentially taking over. Their goal is to be the most innovative and creative.

Whereas small businesses are more focused on being profitable and aim to serve a localized market. Personal relationships with their customers and a connection to their community is also an important element. Small businesses are usually either family owned, passed down through generations, or driven by a creative passion.

Across a variety of industries, there are five common types of startups, all of which have a different approach when it comes to scaling (i.e. growth).

Small business startups - With a small business startup, while they are interested in growing, they do so at their own pace. Most of these types of companies are usually bootstrapped or self-funded which means there is less pressure to scale up fast or feel pressure to do so because of the needs of their investors.

Buyable startups - These are businesses that are meant to be bought out.The concept behind them is a small team builds a business from the ground up and then sells to a bigger player within the industry. These types of startups are usually in the tech and software industry and are the perfect fit for entrepreneurs who aren’t looking to operate the company themselves long-term.

Scalable startups - The common denominator amongst startups is the need to scale. Regardless of whether you’re a business with a dozen employees or an operation of two working out of your garage, this holds true.

Some startups are easier to scale than others. An example of scalable startups are consumer and business apps. Once these companies build up a buzz and a user-base, it’s easier to acquire new customers.

They then raise money from outside investors (angel investors, venture capatlsits, business partners, friends, family) and in turn can support their growth initiatives to gain more customers and hopefully the attention of someone who is interested in buying them out.

Offshoot startups - Despite what some people may think, not all startup companies are built from the ground up. In fact, some are an extension or a branch off from larger parent companies that go on to become their own entities, hence the term “offshoot.”

The reason for doing so might be to establish themselves in a new market or disrupt a smaller competitor. Since they act separately from the parent company, they have the freedom to do business without drawing as much attention or scrutiny. 

Social startups - These types of startups are designed to do good and include charities and non-profit organizations. They scale for the sake of philanthropy while operating similar to other startups but with the aid of grants and donors.

All startups, regardless of what they do or the industry they’re in, go in with the intentions of creating a scalable company. Some industries are more popular than others. Five of the top startups can be found in the following sectors:

Financial Technology (FinTech) - In this space, technology is what drives the business. FinTech companies aim to make financial services more accessible and convenient for consumers. Think of companies like Venmo, Square, and Coinbase to name a few. 

Business 2 Business (B2B) Software and Services - These types of companies create services for other companies to better manage their business as well as interact with their customers. Examples include Slack, the messaging platform, Dropbox, one of the most popular cloud storage spaces, and Salesforce, a software tool utilized by businesses to track sales efforts.

Healthcare and Virtual Medicine - In this space, startups are created with the purpose of providing new and convenient ways for people to manage and track their well-being. Calm, an app created around wellness, helps people access a better quality of sleep through the use of well thought out technology. Path, an online network to help people find therapists and other mental health professionals to address their needs are just two examples of an industry that is continuing to explode.

Consumer Goods and Service  - Businesses in this space either provide a fresh spin on existing goods and services or bring new ones to consumers. Examples include Doordash, the popular food delivery service, and AirBnb, the home-sharing service.

Consumer Media - Consumer media startups are focused on providing consumers with new ways in which to interact with and enjoy media. From live streaming platforms such as Twitch, YouTube, DLive, to online communities and forums like Reddit, Slashdot, and Quora, to name just a few, it’s all about connecting people.

There are startups for every type of entrepreneur and business idea and one of the many reasons why I love working with these types of businesses.

Our clients are innovators, changing the world to be a better place and there is nothing more inspiring than that. I love being able to spread their message and help make their dream a reality.