What’s a startup?
It’s become a hot topic of late, and left many bewildered as to why we’re still grappling with the question. While most of the world understands startups in the context of technology-driven or disruptive companies, it seems that many in Australia still understand the term to mean a small business that is starting up.
So, to clear things up, we asked some people in the community how they define the term:
“A startup is a temporary organisation that is still discovering its purpose and intends to grow very large when it finds it. A small business knows what it is and will probably stay comfortably small forever.
“For example, YouTube was a dating site in its days as a startup but discovered it needed to be a video-sharing product. When it knew this, and understood how to make money, it ceased to be a startup and began scaling. In contrast, a web development agency has a well-understood business model that can immediately be executed. But it is unlikely to be a massive business.”
– Phil Morle, CEO Pollenizer
“The question for me is between a startup and a new business, and the only (but huge) difference is product market fit. A startup isn’t a business yet. It’s a guess that if you build X product that Y customer will value it. When that changes from a guess to a reality, you’re a business. For a new business, they already know the product is valued by customers, it’s just a question of whether they can find enough of them and deliver it efficiently.”
– Mick Liubinskas, entrepreneur in residence Muru-D
“Over the last decade I’ve seen leaders from a host of countries make bold statements about the importance of startups – and they are talking about emerging high-growth, technology companies that are tackling global markets, not small businesses or SMEs. Most developed economies now have policies specifically aimed at supporting the startup sector. You just need to look at the raft of pro-startup programs in countries like the UK, Sweden, South Korea, New Zealand, Singapore and Canada.
“In contrast, Australia’s political leaders still seem to be focused on ‘small businesses’ and ‘SMEs’ (even if they incorrectly label them ‘startups’), despite overwhelming evidence that startups are a massive source of economic growth.
“When we do hear from the government about ‘startups’, the debate seems to revolve around removing handbrakes on the sector – such as the current tax treatment of employee share schemes.
“It goes without saying that this needs to be fixed, but while we’re talking about removing handbrakes, the rest of the world is firmly pressing the accelerator by launching programs to accelerate the growth of the startup sector.
“The latest budget saw significant cuts to programs aimed at supporting startups. How can it be that in Australia the government’s support for startups is decreasing at a time when the rest of the world is increasing its investment in this sector?”
– Colin Kinner, director of Spike Innovation and author of the StartupAUS Crossroads report
“I’m still comfortable going with the definition we used in the Crossroads report, namely: StartupAUS defines a tech startup (or startup for short) as an emerging high-growth company that is using technology and innovation to tackle a large and most often global market.
“Startups have two important defining characteristics: Potential for high growth and disruptive innovation. Small businesses, on the other hand, lack those defining characteristics.”
– Alan Noble, head of engineering Google
“There’s a huge difference between a startup and a small business. A startup is a business that is still working on a viable business model and uses technology for massive scale.
“This means that Twitter is technically a startup, as it is still working on their viable business model and has a huge use of technology for scale, but your mum’s bed and breakfast that has a website is a small business.
“Disclaimer: My mum runs a bed and breakfast www.learnfrenchintayac.com ;)”
– Seb Eckersley-Maslin, founder BlueChilli
“A startup is a very distinct thing. A startup may turn into a small business, but it doesn’t start out like one and therefore has to be supported and encouraged in a different way.
“Startups are high-growth, high-risk ventures that set out to find a scalable business model in a large market. They almost always have a strong technology component in order to facilitate the ambitions of rapid growth. At the very beginning of a startup, it is usually unclear who the customer is and how they will obtain value from the product.
“Over time, startups have the capacity to make economic and cultural contributions that are disproportionate to their modest beginnings.”
– Scott Handsaker, co-founder Startup Victoria
Editor’s note: You’ll notice that StartupSmart is heavily focused on technology startups these days, as we’ve come to better define the term for ourselves.