I believe the overuse of the word startup comes from a certain kind of pretentiousness, a want to associate one's own small-business, small-market, technically trivial, mom-and-pop online business with world leaders like Facebook and Google. Making the linguistic link is good for the founder's ego, and even better for convincing naïve investors to fund barely viable visions.
If you're one of the many non-technical teams who cannot build products yourselves and have an idea with dubious money-making prospects then you can have a great adventure on half a million euro of dumb money, and believe me many founders in Berlin are.
I've lived in Berlin since January and during that time I witnessed a rising hipster startup culture. Unskilled and unexperienced college graduates with big egos raise dumb money, hire programmers to build code they don't understand, then spend their days 'networking' at trendy hotels in down-town, throwing minimal techno parties and going on trips across Europe for 'business and pleasure'. It's a great lifestyle, and I've nothing against people enjoying themselves - it's certainly my priority now. But I find this sort of carry on repugnant when an investor's money is at stake.
Viaweb was founded by PHD students at MIT, one who invented the worm and the other who wrote timeless Common Lisp textbooks. The modern waterfall of self-professed 'startups' are run by guys and girls who watched 'How to Build a Blog in 15 minutes using Rails' then decided they were the next Steve Jobs. Let's get realistic here - building a web app or an Iphone app these days is no more high-tech than a mechanic fixing your broken car.
Drop the ego, drop the pretense - the majority of business now labelled as startups are small online businesses and there's nothing wrong with that.