When is a Startup no Longer a Startup?

When does a startup become a company? Is it a case of profitability? Team size? Revenue?

It’s been on the front of my mind recently. Part of my job is to manage perceptions of HelpDocs as a brand, and I’m becoming more uncomfortable with the inferences that come with the label “startup”.

Don’t get me wrong, I love the startup world. It makes me happy to see new, disruptive products released into the world on a daily basis. Nobody knows where or when the next big shift will come, and it’s exciting.

Startups are the difference makers and the dreamers. They are the ones willing to put it all on the line in the name of disruption. Plugging away, carving out a market, cobbling together a sustainable business model while wrestling with questions of monetisation and how to become profitable.

But along with the admirable traits of scrappiness and unrelenting passion comes the risk factors. Longevity, sustainability, reliability, and the likelihood of a pivot that cause potential buyers to be wary of products associated with the term “startup”.

It got me thinking about how we operate as a small, bootstrapped team. Are we still a startup? Were we ever? 🤔

I’m not sure. It’s a question that’s been plaguing me. After all, what’s the difference between a startup and a company? More to the point, at what point does a startup become a company?

The seed of all this conundrum is a couple of recent inbound tickets from prospects who were interested in using our service. As startups themselves, they expressed concerns about our longevity, and it struck a nerve with me.

I know I shouldn’t take this kind of thing personally. Heck, I’m not even an owner or a co-founder. But it’s my job to manage the perception of the brand. And it’s my job to make sure we’re building trust with potential customers.

So, this felt like I hadn’t been doing my job well enough! 😭

Conflating Startups and Young Businesses

With all this bugging me, naturally, my instinct was to research and figure out how other people define startups and companies. What I found, surprised me.

For many, being a “startup” doesn’t mean being a new business per se.

According to Invento Robotics CEO, Balaji Viswanathan’s much-read post on Quora (republished here on Forbes), it’s not enough just to start a company. The business model itself must be something new and disruptive.

For example, the business model of renting out a room is nothing new—the hotel industry has been around for a very long time in one form or another!

However, an application that acts as an online agent connecting individuals with rooms, to people who need a place to stay was an unproven business model. Until Airbnb came along.

Airbnb provided the disruptive and new business model. Thus, it was a startup.

Another example. Getting a taxi to from one place to another is an established business model. However, an app that connects drivers to people who need to get somewhere was, until Über, an unproven model

Once a startup finds a model and product with a market fit, Balaji says it “stops being a startup and graduates to an enterprise”.

I like this definition. It makes sense to me. It’d be odd to consider a taxi driver or a hotel to be a startup any more than a newly franchised McDonalds outlet.

When markets and models are established and have been proven to work time and again, it’s hard to take up the mantle of “startup”.

It’s like there’s a kind of burden of disruption and discovery which becomes a pre-requisite of being seen as a legitimate startup. A risk factor in exploring the unknown and trying new things until finding the right market fit.

Airbnb is no longer a startup. Über is no longer a startup. By Balaji's definition, many businesses that we think of as SaaS startups are in fact not startups at all. Because they’ve proven their business models and graduated to be an established business.

Of course, there are numerous other definitions of what constitutes a startup that contradict this a little.

In a 2012 article, Y Combinator founder, Paul Graham, backs up the premise of the former definition but considers growth as the main differentiator.

Companies designed—or at least intended—to grow fast are considered startups. Companies not designed to grow fast, by extension, are not.

The example used in the article is service industries, and specifically a barbershop—the supporting claim being “a barbershop doesn’t scale”. I’ll take this at face value. We could dig deeper and pull apart the idea—after all, there are many chain service companies who would likely disagree.

I still take issue with this definition, though. It almost precludes the idea of graduating from a startup phase. There’s suggestion some successful startups will grow into bigger companies, at which point growth slows as the company reaches the limits of the market it serves.

For me, there’s too much reliance on arbitrary numbers at which a scaling startup transcends startupdom. But I digress.

Of course, these are only a couple of many definitions of what it means to be a startup vs. a young business. Others might take similar stances on disruption and scale, but add things like employee numbers, revenue, or even “state of mind”.

In fact, definitions are so varied, the only real constant is “we know startups when we see them”.

Rethinking our Perception

In that sense, I guess perception is the key. Which, sadly, means people who perceive us as startups are a result of my failings to convey any other persona.🙈

The truth is, I’m not sure we are a startup. In fact, I'm not sure HelpDocs ever intended to be or be seen as one.

We aren’t carving out a market fit, disrupting a business model, or struggling to get people to find us. We are growing steadily at more than 10% month on month. We make enough to pay sensible salaries, and support the—admittedly small—team.

Having bootstrapped the company from their own back pockets and taken no funding whatsoever, we are not in any form of debt. We are no beholden to VCs or shareholders.

Nor do we have ambitions of unicorn-level growth—as nice as the idea may be. In fact, when we refer to ourselves as a “unicorn” company, it’s in the fun, cuddly, non-threatening way as opposed to the “ultra-growth + ultra-ROI” sense.🦄✨

What we are is a successful small business with a solid and increasing MRR, a happy, relatively churn-free user base, and a super-happy team.

I guess now, I need to find a way to bring that perception to the world. 😅