Few Takeaways from my Master thesis (still in progress) — Chapter 1
How do you define a Startup?
Not many of you know but for my Master’s Thesis, I’m trying (boldly) to predict startup success. One of the questions that came up is how do you even define a startup?
So what is a startup?
The world’s greatest innovators and entrepreneurs tried to define this subject. Each with its own perspective and mantra. I’ll try in this post to summarize the best definition I found and hopefully try to convince you why all of them were right.
*All relevant links in the comment below 👇
Let’s start with Eric Ries the father of the Lean Startup Method.
In his eyes:
“A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty”.
In a closer look — we don’t see any reference to the size of the company, the industry nor the technological breakthrough we all connect when thinking about a startup. In essence, in his eyes — a startup is a human enterprise.
Great! We have it!
But do we? is a startup only related to its people? if that is the case then why are Microsoft or @Mobileye, companies with the best people around the world aren’t considered a startup?
Here, the next prominent figure comes to place — @Paul Graham the Founder of @Y-Combinator. In his perspective, it’s much more simple. WAY more simple. So simple it is only one word.
Graham claimed that a company is designed to grow <> where a startup is designed to grow fast🚀
Also here we don’t see any reference to #venturecapital money or being a tech company. in his opinion: “Everything else we associate with startups follows from growth”.
Ok. What do we have this far? a startup is a human enterprise focused on growth.
Humm, is Wix a Nasdaq traded company with a market cap of $11.5B🤑, over 2000 employees🦸♂️🦸♀️, and over 165 million users a startup? probably not.
So what are we missing?
Let’s dig deeper…
@Peter Thiel — yes the Peter that founded PayPal and wrote one of the most known volumes in the startup bible — the Zero to One book — says that fundamentally, startups are about creating technological innovation. He defined it as a vertical innovation rather than a horizontal one. What is a vertical innovation? companies like: Youtube, Facebook, etc. — it refers to a technology that has not been created before. Those companies aim to create a monopoly in a niche market and then expand to new markets. Or to quote one of the best lectures by Gil Sadis from @Leamodade “become a big fish in a small pond”.
But what is a horizontal innovation? bringing existing technology to places that do not have it. What is technology? according to Thiel, technology is basically a new and better way of doing things.
in that sense — and to my humble understanding, it has to have a somewhat of an innovation spectrum — a technological innovation or a business innovation.
@ Google and @ Airbnb brought to our life innovative products and in every sense, they were considered as startups.
Last short recap — startup is a human enterprise focused on growth that has a technological or business innovation. So Airbnb a privately held company (about a year ago) is a startup? What we are still missing?
A more common phenomenon that is growing the last couple of years of PIPO (Private IPOs) — allows private companies to raise growth capital at scale — a thing that was previously accessible only from public markets — so Airbnb, after raising gazillion of dollars and checking all other metric is still a startup. Isn’t the time factor also important?
We saved the best for last. The undisputed grandfather of the Lean Startup method Steve Blank and another volume from the startup bible “Four Steps to Epiphany” — why grandfather you ask? In his class, Eric Ries thought of the lean startup method!
Anyhow, Blank described it as follows: “A startup is a temporary organization used to search for a repeatable and scalable business model”. When a business model is repeatable it means you can reapply the same practices repeatedly to create predictable results — if it is user growth or revenue (Eric’s uncertainty & Paul’s Growth metrics?) Why are time and scale are important metrics?
Scale can be translated as your global ambition, therefor using technology can help you be more effective and efficient.
Let’s try to wrap up, I think that all of them were almost completely right.
So what we had Pinto?
- Human Enterprise with abandons of uncertainty.
- Technological or Business Innovation
- Temporary status.
- Searching to replicate and scale their business model.
A startup is a temporary human enterprise organization bringing technological or business innovation, focusing on growth and in the search for a repeatable and scalable business model.”
Why it is important?
Like everything in our lives, in order to fundamentally do something — rather than becoming an Entrepreneur, an Angel, or a VC investor — I think you need to start with basics and learn from giants.
What is your definition of a startup?
- Graham, P. (2012), “Startup = Growth”, available at: http://www.paulgraham.com/growth.html.
- Ries, E. (2011), The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, edited by Business, P.
- Thiel, P. (2014), Zero to One Notes on Startups, edited by Business, C.Blank, S.G. (2006), The Four Steps to the Epiphany.