When is a startup no longer a startup? Ask 50 entrepreneurs and they’ll likely give you slightly different answers: it’s when a company moves from idea to public listing, or it’s when a team of two grows to four or it’s when it lands its first paying customer.
Why is the term so difficult to pin down? It’s likely because every new venture that sets about turning a light-bulb moment into a living, breathing business is unique.
Many founders desire to play Peter Pan as long as possible and remain comfortably hidden behind the startup title because let’s face it, startups are cool, edgy and agile. Their missteps are likely to be forgiven compared to those of their proverbial older brothers (i.e. established businesses).
But what determines when a company should shed its ‘startup baby fat’ and step out into the world as a mature, executing business?
Find a process and repeat. In my opinion, a startup’s lifecycle should be brief, existing through the company incorporation, the first stages of onboarding employees and through the transition to a functional entity. In my mind, as the company moves from developing an idea to executing on processes, it is taking the first steps towards being a legitimized business.
This is the stage where founders should have an established business model for their venture and have begun building the repeatable processes of the company. This is growing up.
These initial, repeatable models might not be perfect, they may not even work in the long term, but they begin to establish a basis for systematization and for future scaling, and draw a clear line between startup and business.
Another key point of differentiation comes with the signing first customers. With paying clientele comes the instant requirement for accountability. This event commonly represents a significant shift in the mentality of most companies. Making that first big leap from pure ideation, to becoming an operating and executing company, can be daunting territory for young ventures. It’s the puberty of the corporate world, but represents a vital transition necessary to achieve sustainability and longevity.
Grow up, but don’t lose yourself. With paying customers in the door, startups now have a responsibility to deliver and to continue doing so. A stagnant business model, however – one that doesn’t move with your customer base – is a surefire way to choke a business. This is a fine line that startups have to walk. They must build strong, repeatable process designed to onboard customers at minimal cost, while maintaining the fresh-faced identity that it made the business appealing to them in the first place.
This is when startups that chose to build creation-based ventures, rather than those focused solely on competing with others, are at an advantage. When a startup begins to focus solely on its competitors, it inevitably erodes its own identity. Startups need to grow up and evolve in the market they’ve chosen. They need to build momentum and to structure which will support scale. But the best startups remain true to their roots, core vision and customers.