What Is a Startup?

The word “startup” has become ubiquitous in American vocabulary. However, there is really no common understanding of the definition. Wikipedia defines a startup as “an entrepreneurial venture, typically describing newly emerged, fast-growing business.” Yet, if you look further, you’ll find that different people mean radically different things when they use the term.

Some people define a startup simply as a newly registered firm with at least one employee, the founder. However, many also include the attribute of scalability in the definition. Others only consider businesses that develop software or produce hardware businesses as startups. So, why do we care that there are various ways the word “startup” is used? Well, since there are so many conflicting definitions, it’s difficult to keep everyone on the same page when you’re discussing economic policy issues related to new businesses.

The reality is that a startup is a temporary status applied to all business ventures when they’re looking for a viable business and economic model. For example, no one can argue that the brand new mini-cupcake shop or self-serve frozen yogurt stand that popped up around the corner aren’t startups, at least not until they prove they are viable. I portend that a startup is any business that has not yet reached profitability at which point they lose their status as a startup and are in fact a business.

However, I have recently noticed that the press, and even certain groups of business mentors, imply that a startup is an innovation-related business that needs to raise capital from investors at some point. These same people also use the phrase “small business” to describe service-oriented businesses such as subcontractors or restaurants.

How do you define a startup? Let me know in the comments below.

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