Sometimes it seems that the trendiest word today is a “startup”. Do you agree? Ok, if you work in the technology industry as we do, you’ve probably heard the term “startup” pretty often. In tech centers like Silicon Valley, Singapore or, well, any startup hub, many are engaged in forming or even launching their own startups.
While popular definition of startup as "tech company with less than 100 people" isn't wrong, it fails to explain its' entire philosophy.
Let us just stop exploiting your patience: in this article we’re going to figure out what is a startup and the differences between the six types of startups according to the Silicon Valley legend Steve Blank.
The definition of startup
You’re not the only one, who are confused about startups and small business definition. Many years investors treated startups as small businesses. This was a real problem, because there is a huge conceptual and organizational difference between a startup, small business, and large corporation. According to startup guru and Silicon Valley legend Steve Blank, a startup is a temporary organization designed to search for a repeatable and scalable business model, while the small business runs according to the fixed business model.
For a startup founder this concept means the following three main functions:
to provide a vision of a product with set of characteristics; Create a series of sceneries of the business model regarding customers, distributions and finance of the company. Understand, whether the model is the right one, based on customers behavior, as your model predicts. How is startup founded?
Most likely a startup and a small business starts from a mere idea, and with founder's own or friends/family money, or a bank loan. Later, successful startup receives funding from angel investors, venture capitalist or IPO. With each funding, an investor receives a part of the company and becomes a co-owner of the startup.
Small Business VS Startup For better understanding the mentioned, watch the video, where Steve Blank describes the difference between a startup and small business.
Six types of startup by Steve Blank
According to Steve Blank there are six different types of startups: lifestyle startup, small business startup, scalable startup, buyable startup, large company and social startups.
Lifestyle Startups: Self- employed falks
A lifestyle entrepreneurs are living their preferred lives, while working for no one, but themselves. These hippies follow their personal passions and value their freedom more than anything. In Silicon Valley such professionals are freelance coders or web designer, who loves their jobs, because of passion.
Small Business Startups: Feeding the Family
Today, the uncountable number of entrepreneurs and startups are still a small businesses. Small businesses are grocery stores, hairdressers, bakers, travel agents, carpenters, electricians, etc. They are those, who runs his/her own business to feed the family. Small business entrepreneurship is not designed to scale.
Scalable Startups: Born to Be Big
Google, Uber, Facebook, Twitter are just the latest examples of scalable startups. From the very beginning, the founders believe that they are going to change the world. In comparison with small business owners, they don't work for earning money, but to create a company that will give back a multi-million-dollar payoff. Such startups hire the best and the brightest. They always search for a repeatable and scalable business model. When they find it, their start to look for more venture capital to boosttheir businesses. Often scalable startups group together in innovation clusters (Silicon Valley, Shanghai, New York, Boston, Israel, etc.).
Buyable Startups: Born to be bought
During the last five years, startups that offer Web and mobile app solutions, are sold to larger companies. This tendency becomes more and more popular. Their goal is not to build a billion dollar company, but to be sold to a larger company for pretty cash.
Large Company Startups: Innovate or die
Large companies have finite life duration. The latest trend of last decates shows, that those durations became shorter. Changes in customer preferences, new technologies, legislation issues, new competitors create pressure, forcing large companies to create new innovative products for new customers in new markets (for example - Google and Android).
Social Startups: Mission - Difference
Social entrepreneurs are as ambitious as any entrepreneur. They are passionate and driven to make an impact. However, unlike scalable startups, their mission is to make the world a better place, not for wealth's sake, but for an idea.
Hope this article was helpful, whether you are planning to found a startup, or already running one.