Two new restaurants recently opened in a shopping mall near my office. Both restaurants are run by the founders, financed by friends and family, have similar revenue, have a similar product, and have a similar target customer. To the casual observer, they are the same type of business. However, one of them is a mom-and-pop shop with no plans for growth beyond their one shop. The other is a prototype being used to test and refine a new concept with plans to revolutionize the industry and expand nationally. The former is just a new company; the latter is a startup.
The difference between just a new company and a startup is a topic often discussed, with some snobbery, in the startup world. Among other issues, some people get hung up on where we should draw the line between a startup and just a new company. It’s not a vital question, but it’s important to realize that there are some crucial differences. If you are founding a company, you should be clear about which type of business you are pursuing.
So how do we define a startup? Steve Blank, the author of “A Startup Owner’s Manual,” offers the most commonly accepted definition of a startup:
A startup is not a smaller version of a larger company. It is a temporary organization used to search for a repeatable and scalable business model.
A startup has not yet become what it dreams of being. It is a temporary organization in which you execute all of your development and preparation. Therefore, a startup is more like an experiment than an actual company. A startup’s business model is scalable, capable of achieving exponential growth.
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