When Does a Startup Stop Being a Startup?

The Great Question. We’ve all asked it before. Now let’s address it. Let’s open a discussion about the ontology of startups.

We talk about startups all the time as if their existence was unquestionable and as if they’d been around since the beginning of time. And yet, grasping the difference between an “ordinary” or “traditional” company and a startup seems rather difficult, if not impossible.

When does a startup stop being a startup? When does it “graduate” or “mature” into a company? Is there such a thing as an eternal startup? Is the term “startup” anything more than just a marketing gimmick, anyway?

What Makes a Startup a Startup?

I’ve seen this topic discussed countless times all over the internet. No uncontested conclusions were ever reached, as is the case with most social media debates. Our goal here is not to try and solve the mystery forever, but to provide an overview of the different perspectives out there – and apply the most commonly used criteria to the celebrated “startups” of Barcelona. Let’s see if we are right to call them startups, and whether we actually have a specific idea of what a startup is in the first place.

So, what is a startup?

How would you explain it to someone who has never heard the term, like your grandma?

No, it’s not about the ping pong tables and the kombucha-on-tap.

Instead of boring you with definitions from Merriam-Webster and Wikipedia, I’ll just throw in a few key concepts that keep appearing when this topic comes up.

There are countless ways to define what a startup is, but most definitions are based on one or more of these three angles.

1. Financial metrics or business position. 

How much revenue a company generates, how many employees it has, how long it has been in business, whether it’s privately held or has become publicly traded in an IPO, and so on. For example, TechCrunch’s Alex Wilhelm believes that in order to be rightfully called a startup, your company has to be worth less than $500 million, have less than 100 employees, and be on a forward-year revenue run rate of less than $50 million.

2. Company management, structure and functioning.

Would the company survive if the founders went on holiday for a month? Can the teams function independently? Is there a solid structure in place? According to some opinionators, if the answer to these questions is a yes, your company is not a startup anymore. Once a startup finds a product market/fit, begins to scale and produces a working model, it’s essentially not a startup anymore – at least as stated in this article on Business Insider.

3. Company culture.

Does the company represent the startup state of mind? Is it constantly filled with entrepreneurial excitement, the incentive to act quickly and take risks? These may seem like nothing more than romantic notions, but they do contribute to defining what a startup is.  

When does a startup stop being a startup
Are startups just weird little caterpillars that eventually turn into beautiful butterflies?

What the first two of these approaches have in common is that they both take the startup to be a young, immature company that eventually develops into a Company with a capital C. On the other hand, those that believe the most important defining factors of a startup are its culture and state of mind are convinced that there are, or can be, startups that stay startups forever.

Other key concepts that often pop up when attempting to define startups are uncertainty, risk, high growth potential, meeting needs and so on.

To sum it up:

A famous quote by 500Startups Co-founder Dave McClure says that A ‘startup’ is a company that is confused about three things: (1.) What its product is. (2.) Who its customers are. (3.) How to make money.” So, following this logic, once a company figures out all of the above, it ceases to be a startup.

I Startup, Therefore I Am?

It’s up to you which definition sounds right to you, and whether you believe in “eternal startups” or not.

In the end, it’s up to the startup itself and the people behind it to decide how they would like to be seen. For some, startup status is something so evidently desirable that they’d do anything to keep it, even after they start scaling. Others may feel that it’s keeping them from reaching their goals, from being taken seriously, so they’d like to shed the label as soon as possible.

So, what about Barcelona’s favorite startups?

Take Typeform, for example. According to some of the criteria mentioned above, with 160 employees, it’s no longer a startup. However, it is the definition of a company that has almost magically managed to retain its startup culture despite the rapid growth.

Read our interview with Sançar Şahin, Director of Marketing at Barcelona’s one and only Typeform!

What about Glovo? On one hand, you can’t deny that it’s a company that has managed to find a perfect product/market fit and is scaling rapidly. Does it have a corporate structure? Not just yet. Could it ever be considered a traditional company though, regardless of how big or corporate it grows, knowing that the way they work in the delivery sector is inherently untraditional?

How Barcelona Startup Trovit is Staying on Top of the Search Game 1250
A distinctly untraditional meeting room in the Barcelona offices of Trovit

Here’s a good one. Trovit. Most people will probably say that it’s not a startup anymore – it’s been around for quite some time (founded in 2006), and in 2014, it was the protagonist of one of the biggest exits in the history of Barcelona. It definitely has a stable structure, with teams not having needed the supervision of the founders for a long, long time. And yet, there are only a handful of offices that still radiate the startup feel as much as  Trovit’s soundproofed music room and funky meeting spaces filled with colorful balls do. It’s no longer a startup, but it’s definitely not ashamed of having been one.

If you’re hungry for more, check out our interview with Carol Murtra and Pilar Perales of Trovit!

In your opinion, which Barcelona startups shouldn’t be called startups anymore?

Featured Image: bbernard / Shutterstock, Inc.

 

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