I have a confession to make. I live a double life.
After three decades of starting, growing and selling companies, I’m still very hesitant to call myself an entrepreneur — as in, when I’m talking to other people, I never call myself an entrepreneur.
Meanwhile, the word entrepreneur is in the first sentence of my LinkedIn profile.
3 Ways to Tell If Your Company Might Still Be a Startup
- It’s new.
- It’s not profitable.
- It’s privately funded.
I’m also very careful about who my audience is when I refer to the company I work for as a startup. Yet one of my startups that purports to serve other startups is called Teaching Startup.
This term shifting extends beyond entrepreneurship. I hold a patent for an invention, but I’d never refer to myself as an inventor. I splash words on pages for dozens of publishers, yet I wouldn’t say I’m a writer.
Words mean things. Labels mean even more. And it’s not even so much the connotation that labels like entrepreneur or startup or inventor or writer suggest. The more damaging impact is when those labels prevent other people from taking you seriously.
So what’s the proper context for calling your business a company versus a startup? And when is it time to put the startup label in the rear-view mirror?
When Is a Company a Startup?
The first thing we all have to agree on is that the terms startup and company aren’t interchangeable. Technically speaking, startup is a descriptor for a company.
It generally means new, but not always. Some companies exist for years, sometimes 10 or more, before falling into the public consciousness of a startup ecosystem.
It often means not profitable, but almost every single startup I’ve founded was profitable within a few months, and definitely before hiring its first employee. Startups that don’t rely on institutional capital are always racing against the clock to get to cash-flow-break-even, and the ones that succeed get profitable quickly.
It usually means privately funded, but that definition can be outgrown. Two companies in my own backyard of Raleigh-Durham — Epic Games and SAS Software — are privately funded, but it seems silly to refer to those orgs as startups.
Again, technically speaking, any company that isn’t public can call itself a startup. Whether you’re a teenager with an LLC and an idea or a 50-year-old law firm, no one is going to stop you.
But here’s the thing. Startup really wasn’t used before the 1950s. Its usage exploded over time, through the 1970s and 1980s (Apple, Microsoft, Dell), and peaked in the late 1990s/early 2000s (Google, Netflix, Facebook).
That latter period is when the meaning of startup morphed a little bit and became a term suggesting a company that was high tech, or at the very least high growth, and one that needed venture funding to achieve that growth, with a high risk/reward ratio attached to that funding.
This is when startup became more of a concept or a philosophy than a descriptor. And that’s when the implications, both good and bad, manifested.
When Is It Good to Be a Startup?
Obviously, if your company is raising outside capital from venture and angel investors, you should call your company a startup.
If your company is trying to push a new idea, concept or product to take market share from a group of entrenched incumbents in a particular industry, it helps to be perceived as a startup.
If your company is one or more people trying to create a new kind of business, sure, call yourself a startup.
But conceptually? Philosophically?
As recently as 10 years ago, at the tail end of the peak of the usage of the term, every company wanted to be seen as a startup – running like a startup, or acting like a startup or feeling like a startup.
Few of them actually did, but that’s neither here nor there.
Anecdotally speaking, I’ve always found that the positive implications that come with the startup label coincide with good periods in the general macro economy, especially when money is cheap, technology is advancing exponentially and consumers are optimistic.
During these periods, the term startup invokes fresh ideas that result in a savings of time and money, more convenience, even aspirational uplift.
Google put information at our fingertips. Netflix freed us from the tyranny of cable. Facebook connected our communities and friends.
Yeah, that sentence, while true, reads today like 100 percent pure sarcasm. So what about now? Today?
When Is It Bad to Be a Startup?
I’ll be the first to tell you it’s never bad to be a startup. But I’ll also refer back to my opening statements and my hesitancy to call myself an inventor/writer entrepreneur who builds startups.
Barf.
So I only use those labels when it makes sense. And today, in 2024, it’s making less and less sense. Money is tight, consumers are drowning under inflation and technology, while allegedly still advancing exponentially in terms of artificial intelligence, has made AI a bad word in a matter of months.
Backlashes tend to happen like that.
Those AI startups are building technology that’s going to take everyone’s job. Furthermore, that AI technology can be built by AI itself, reducing the need to invest in good old-fashioned human ingenuity to build yesterday’s high-tech, high-growth startups. And on top of that, risk is off, in general. So any investor money not going into AI is staying on the sidelines.
What’s a non-AI startup to do?
Call itself a company. When not talking directly to investors, I find that most people like me are shying away from the term startup when talking about their startup, because the connotation is often leaning negative these days.
Employees don’t want to work for underpaying startups that are going for broke on the backs of their talent. Enterprise customers and partners don’t want to sign on with a startup that might suddenly run out of runway tomorrow, leaving them and their customers in the lurch. Consumers who believed in Google and Facebook and the promise of streaming are most definitely second-guessing those allegiances.
But this isn’t new, either. Anyone who lived through the dot-bomb crash will tell you that people generally hated tech and startups then, too. Meanwhile, smart investors poured their money into Google, Netflix and Facebook.
When Should You Stop Calling Your Company a Startup?
The short answer is: Outside of going public or being that 50-year-old law firm, there really isn’t a reason to stop calling your company a startup until your company is no longer raising outside money or is old enough that the connotations stop being positive.
But to be clear, in times like these, there’s really no reason outside of raising money to call your startup a startup in the first place.
The term startup, in 2024, really is more of a concept or a philosophy than a descriptor which attaches any useful meaning to the company it’s describing. Any car can be a sports car if you drive it fast enough and take the corners harder than you should.
If the risk/reward ratio is high for investors, partners, customers, employees and, most importantly, founders, then you’ve got yourself an honest-to-goodness startup. Call it what it is when you need to.
