Startups are like baby chicks. One day they won’t be baby chicks anymore. They’ll look different and act different. But when does that actually happen for startups?
I like Steve Blank’s take: a startup is an organization formed to search for a repeatable and scalable business model.
Taking from this, you can say once the startup has found that repeatable and scalable business model, it’s no longer the same organism. It’s now something else. Three events can change the course of a startup:
- It gets acquired.
- It gets customers that grow revenues (as opposed to just a handful of customers that barely pay the light bill).
- It receives sizeable funding (more than seed money).
At that point, while it’s subjective, I’d say the startup becomes something else. Maybe it’s now a division of a larger corporation (like when Yahoo! Music bought MusicMatch), or on its way to becoming its own corporation (like Skype).
So Who’s Still a Startup?
Sometimes companies identify with the culture that being a startup brings…to their detriment. Twitter, in my mind, is still a startup, though they’re pretty big to still be wearing diapers. But they don’t yet have a repeatable and scalable business model. How long can they get funding if they can’t provide their business model?
Facebook, on the other hand, though it still carries its flip flop culture, is now a corporation. It now has over a thousand employees, and has the ad revenue formula down pat.
While there’s certainly some glitter and glamour around being a startup, being one too long is like being a 22-year-old high school senior. People start to wonder why you’re still at this stage. Sometimes it’s out of fear of becoming a small fish in a big pond, while other times it’s a matter of not wanting to accept that maybe you’ve put a lot of time and money into something that won’t float long term. Whatever the reason, make sure you know where you are on that trajectory.
Photo: Flickr user mikecogh. Creative Commons 2.0.