6 years old, just raised $150mn...yeah, that's not a startup anymore. It seems some people consider tech companies and startups to be equivalent, but startup is a term for business stage not business type.
- the thing to brag about at meetups is not profit, but investor money taken and burned
- you need to grow very fast, because it's how you get investor money
- you ain't going to have a profitable business anyway, so you need to have a plan to sell your soul (and users), aka. "an exit"
- working overtime for free is justified, because "startup!"
etc.
But the primary reason for calling yourself "a startup" seems to be the association with "sexy and innovative crowd". You lose the label when you've been around so long that you make a profit and have other startups competing against you.
Evidence: I don't see companies bragging about being "Small Businesses", which would be a legal term.
It's pretty standard when you're a salaried employee.
It boosted my annual salary noticeably, because we worked 45-50 hours nearly every week. I hear that the OT policy still exists, but few people still get OT because of the DoD sequester. But in 2010-2012, it was very nice.
A 'startup' is a company that is confused about:
- What its product is.
- Who its customers are.
- How to make money.
As soon as it figures out all 3 things, it ceases being a startup and becomes a real business.
I think this is really a clever way to define a startup, it is true to the experience, and takes away the hype.
Or grow a sustainable business from something small to something huge that produces a lot of cash along the way while your enterprise value increases ahead of a large exit (or die trying).
The term is not well defined, and basically meaningless; but I think a definition that would resonate more closely with most people is "a company whose meta-strategy is to expand like crazy, whose strategy is flexible, and who is not yet an industry pillar".
Answering the next question is a bit trickier. You said "nets (profit) me $5k/month" which can be interpreted in a number of ways. So I'll answer with the two most common interpretations.
If you're SaaS business can pay you and anyone else needed to run it, a salary and some benefits, and at the end of the year, after accounting for depreciation of assets, expenses, and taxes is $5K in the 'black' (so the LLC, S-Corp, what have you, could 'bank' that $5K for future expansion) then no it isn't a start up any more. It may be a boutique business but its a going concern.
If you run a SaaS business with no employees, and use the revenue to pay your living expenses, have no benefits and you happen to end up with $5K unspent at the end of the year, its more of a consultancy than a startup.
Good examples in an adjacent field are accounting companies versus accounting consultants. My mother-in-law ran her own little tax accounting business for years. Not a startup (it was self sustaining) but not large either.
In this case, if the company is still growing quickly 6 years in, maybe its still a startup?
So what about Uber, Airbnb, Dropbox then for instance? For me Airbnb and Dropbox are definitely startups still, however Uber not anymore, even though they have similar size.
Why is that, is it the culture, where flat hierarchies are combined with high-growth rates? This is not the case with Google, definitely not Amazon, Apple, Facebook anymore, however, it is the case with Dropbox with 979 employees and AirBnb with 1,876 employees. Uber has 2,625 employees, are they already out of the startup size that is maybe 2,000 employees?
http://steveblank.com/2010/01/25/whats-a-startup-first-princ...
Yeah, they've done that. If you do an exit and kill the product, the original need of users is left unfulfilled, so there's a space for someone else to do the same trick again.
So is that different future one where there will be further penetration & distribution of existing Square products or will we continue to see Square more horizontally integrate services for businesses? I personally think they have lacked a clear vision over the past few years but have reshaped it and resold that to investors for a valuation 2x from 2yrs ago.
If you're doing customer discovery, throwing MVPs out to see what sticks, and pivoting constantly, you're a startup. If you've found product-market fit, are making quality products, and are entrenching yourself into the market and eliminating competitors, you're a business.
Or, to paraphrase Eric Ries: a business is a predictable engine for repeatable revenue generation. The process of groping around in the dark trying to create such an engine, is a startup.
losing money as an intermediary on financial transactions is not easy. banks and organised crime sure scratch their head looking at square.
>> If you want to understand startups, understand growth. Growth drives everything in this world. Growth is why startups usually work on technology—because ideas for fast growing companies are so rare that the best way to find new ones is to discover those recently made viable by change, and technology is the best source of rapid change. Growth is why it's a rational choice economically for so many founders to try starting a startup: growth makes the successful companies so valuable that the expected value is high even though the risk is too. Growth is why VCs want to invest in startups: not just because the returns are high but also because generating returns from capital gains is easier to manage than generating returns from dividends. Growth explains why the most successful startups take VC money even if they don't need to: it lets them choose their growth rate. And growth explains why successful startups almost invariably get acquisition offers. To acquirers a fast-growing company is not merely valuable but dangerous too. <<
Then you pivot half a dozen times whilst getting investor money, which you whisk away to your private accounts in tax havens, then after 1-3 years you get acqui-hired by Google, Facebook, or Twitter.
Take any service or product needed, from office space to hosting to headhunter. Have a middle-man provide that service, and provide a kick-back / incentive / referrer fee to the person choosing the service or product needed.
Again, it is illegal, possibly fraud possibly other, and certainly not unique to startups. Things like competitive bidding attempt to mitigate this risk, as do knowledgeable advisors to investors. And many other methods.
If somewhat foolish as one's personal reputation could be dashed in an instant, a VC/PE firm managing other people's money may not like having their own gullibility publicized in equal measure, leading to an under-the-carpet affair, or something else.