When one pictures a start-up company, what may come to mind is a large industrial space with ping-pong tables, free food, colourful walls, and maybe even a slide from the second floor or a craft beer bar. But it’s not the playground-inspired perks that make a company a start-up, so what is it? And at what point is a company no longer considered a start-up?
First of all, let’s define what a start-up is before getting into what it is not. A start-up is literally a company that is starting up — it’s new, innovative, and likely filling a hole in the market. Starting up requires a lot of money, with almost no revenue to speak of, so they are started by entrepreneurs with financial backers via accelerator programs, crowdfunding, venture capitalists, loans, other investors in their company, or by someone using their own resources.
Once a start-up is established and generating revenue and profit, it is still growing and in the initial phase of business, so it can still be considered a start-up. There is always a risk of business failure when a company is just beginning. The first three years consist of an accumulation of vital, make-or-break moments for a new company.
But youth does not a start-up make! Being part of a start-up comes with a certain frame of mind and method of work — an elusive energy that isn’t found in the cubicles and recycled air of massive conglomerates. Start-ups feature relaxed and casual workspaces and hours, within which dedicated and passionate people work creatively to solve problems for their communities and the world at large.
Start-up founders, backers, and employees see the business as worth the risk of failure because they believe in what it is trying to do, and they want to make an impact through it. Thus, the old 9-to-5, suit-and-tie, punch-the-clock model of business does not remain important because their company isn’t about that — it’s about their ideas, the work they do, and what can be accomplished.
Because of this new business non-model, as well as the igniting force of fresh ideas, start-ups usually end up disrupting and/or revolutionizing the industries they’re trying to break into. Just think of Uber’s contentious relationship with the taxi companies it overshadowed and pushed out of many major ride-share markets.
Most people agree that once a start-up is acquired by a company, it ceases to be a start-up. Others posit that once a company becomes publicly traded, it stops being a start-up, and so too when it is valued at over a billion dollars.
A start-up, then, ceases to be considered a start-up once it has reached a certain revenue and profit milestone, is bought by another company, or gets listed on the stock exchange.
Selina Barker | Contributing Writer