Hacker News Reader

Comment by dmix | Hacker News Reader

A new reference article for those who want to know the difference between a startup and a small business?

I'm wondering what you see the difference as? For me, every start-up is a small business (with various size visions), and every small business is a start-up.

Is it the size of the vision? (ie, a boutique cafe will only ever be small, while a start-up might be valued at $15B) Or is it the difference between leveraging effort rather than leveraging scalable code?

I think PG describes the distinction quite well:

To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn't scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs. -- http://www.paulgraham.com/startupfunding.html

I understand the distinction, but bands haven't turned out to be the best analogy. Thanks to P2P, etc, most bands now make little from CD sales, and have to pin their hopes on touring and merchandising - things that look a lot like "playing individual weddings and bar mitzvahs." And there was always the Grateful Dead, and Phish, The Black Crowes, etc, etc, which build a loyal following through their concerts, and encourage taping, thus in essence giving away millions of copies of their songs in order to promote their concerts and merchandise.

Likewise, for startups, the distinction isn't always that cut and dry. If you're an Oracle or a Salesforce.com (both of which were once startups) you probably had to do customization for every one of your first n clients in order to make the sale.

I think there are obviously businesses that let you scale easily, and ones that don't, and the quote above is a good starting point, but it's not a 100% clear line. And often what looks like a scalable business turns out not to be so, and vice-versa.

I think you may have missed the point. Playing a wedding or bar mitzvah is custom work on contract with a single client who to some extent directly dictates your set list, etc. Playing a giant stadium concert is you putting out your product and thousands of individuals autonomously buying in.

I'm just trying to muddy the point. Most of those bands playing giant stadium concerts started out playing maybe not bar mitzvahs, but small clubs, and doing cover songs. The distinction between products and services is not as clearcut as pg describes.

yeah, look at starbucks - they offer a service, but they've standardized the experience and packaged it into a product. I think the key is replication, not service.

I was talking to Justin recently, and he gave the most succinct definition I've heard: A startup is a business aiming for a liquidity event.

Edit: Reading the responses to this, people clearly got the wrong idea. A liquidity event != early acquisition. But every successful startup nonetheless hits liquidity: acquisition, IPO, or substantial dividend payment to its shareholders. And that's a distinction between a successful startup and a successful small business, which are not intended to achieve liquidity.

Succinct but definitely not universal. Like seemingly everyone else here, I'm a startup founder, and I did it because I thought what I created needed to exist.

A "liquidity event" (god I hate that term) might be possible but it's not the driving force. If someone offered me a huge sum of money, I might be tempted, but I'd just take that money and work on the next thing I considered needs to exist!

I don't think people obsessed with the goal of money beyond anything else create startups, although they might find great riches as a result of their efforts. If money was the only thing in my life I'd probably have tried to found an investment fund or a real estate company or something.

Sorry to talk about myself here but in such things one can only really refer to one's own experience.

If you'd take the money (and if you have clients it's really hard to take the money because they hired you) and you'd start the next thing, you're the perfect startup founder.

That's a popular one, but I find it so depressing. Here you've quit your job and thrown yourself into something you believe in, and from the first day you're thinking about how you'll unload it?

I think the idea of startupism, or startup mentality, is that one believes most of all in starting things - kicking off great ideas - rather than being a shopkeeper. There are other people who like being shopkeepers. Let them run it after you've created and tamed it for them, so you can be free to kick off other great ideas - or to help new entrepreneurs do it.

Reply on news.ycombinator.com