What is a Startup Business?

Are you confused about what a startup actually is? Say no more: This article will explain everything!

By Paige Banks

In recent years, we have witnessed a steady rise in business ventures that choose to call themselves startups. But what is the reason for the boom of this specific type of business? And the increased awareness of their originators, the so-called entrepreneurs? Since the dawn of the decade, a substantial public interest in promoting and funding startups that seek to bring innovation, products, and means of business to the market has exploded. 

This article seeks to explore what a ‘startup business’ essentially is. Who knows – maybe it can spark up the fire under you and help you create something great.

Are you looking to start your own business? Find out if you have what it takes to fend off dragons and become an entrepreneurial prince among frogs? Do you have what it takes to make it? 

Defining a Startup 🧐

The main issue with defining what a startup is that there's no consensus among industry insiders about what qualifies as a startup. A broad definition does the trick in most cases, but if you are interested in the nitty-gritty details, we will elaborate a bit on the concept. To do so, we would like to tell you a bit about turtles:

As soon as a turtle egg hatches, the turtle is under tremendous pressure to survive from the get-go. Why? The hatchling has to reach the ocean in a very limited timeframe and escape the sandy wasteland from where it was conceived. In just a matter of hours after conception, the number of baby turtles will be decimated, and the beach will slowly take form as a Turtle-Normandy. Only the lucky few will reach the waters, experience the vast oceans, and win the gift of life. The rest, tragically, end up as seagull dinner.

And Why Is This Relevant, You Might Ask?

This phenomenon is not only seen in the animal kingdom; it also presents itself in the world of business. In the early stage of a company, you are voluntarily taking part in a turtle race. Equally vicious – equally violent. The odds are stacked against you from the get-go, and only a lucky few will survive. In fact, 90% of all startups will give in before the magical three-years-of-operation mark. They don’t end up as seagull dinner but swallowed up, nonetheless. You’ll have to be one tough turtle to make it! 

In this weird timeframe, where the jungle law rules and the uncertainty is the only certainty, the company has the honor and privilege to identify as a startup business. Congratulations!

In the startup phase, the company is trying to find its direction. In other words, it is trying to discover a product-market fit. It has to adapt to a market, balance customer segmentation, customer acquisition cost, and experiment with different product features. If everything comes together entirely, the business might have a chance to evolve from the startup-cocoon and experience the magnificent oceans we refer to as the ‘markets’.

The natural selection mechanism is brutal, but always honest. It's an essential part of the eco-system and the reason you'll have to create something spectacular (or at the least useful) to stand a fighting chance. Otherwise, you'll end up dead in the water before the (ad)venture got started.

To Sum Up: Being a startup is a state (or a process) that involves identifying and building a unique solution to a problem that exists in the marketplace – and establishing a proper product-market-fit. When a company is successful in doing so (and safely reaches the waters), it evolves from the startup phase and is, finally, ready to scale.

But That's Not All, Folks. There Is More:

From our perspective, the definition of a startup is not only limited to what phase it exists in. That is a bit too simplified. To be a real startup, you need to check some other boxes too. In a world of fake entrepreneurs and charlatans selling dreams for cash, we would like to make the case that a crucial part of being a real startup is about intent and ambition. Let’s explain!

The Cuttles Startup Definition 

"A startup is a business venture that seeks to bring a unique solution to a new- or existing problem, and bring awareness to its existence. A startup has high growth ambitions and wants to achieve maximal impact with its vision. Furthermore, a startup is a dynamic entity that adapts to society's ever-changing needs with a drive to add value – continuously."

Let's Unpack That A Bit:

A startup solves a problem & bring something new to the table:The startup company begins with a simple singular purpose – to solve a problem. You can develop a great product, have stellar company values, and the right team to conquer the world. It doesn't matter, though, if you aren't solving a problem that real humans have.

Let's give an example: Today, you probably don't know a single person, that isn't a proud owner of a camera phone. But the camera phone is actually a rather old invention that took several decades to catch on. In the mid-'60s, it appeared as though camera phones might even would become a reality: The company, Western Electric, spent years developing and testing the Western Electric Picturephone®. They introduced it to the World's Fair in 1964 to see what people thought of the prototype. They hated it. Undaunted, Western Electric continued to develop the Picturephone and put it on the market in 1970. Everyone still hated it. It offered no real value to the public or the current state of society. Western Electric brought something new to the table, but they didn't manage to solve a problem. They were simply ahead of time, and regardless of the grand vision displayed, they failed big. If social media and selfies had been around in the mid-60s, it might have been another story.

Many people think that business is about making money. This is, indeed, a strong argument, but from our point of view, this is the wrong mentality. Business is about solving problems. Making money is a very positive and welcomed side product of that. There is absolutely nothing wrong with making money, but if the green is your only compass, you'll eventually get sidetracked. Focusing on problems, and innovative solutions to solve them will make sure that you are always relevant to the marketplace. It will keep your organization agile, flexible, and adaptive – something we will expand on later in this article. So keep on reading!

A Startup Has High Growth Ambitions & Strives for Maximal Impact

Why is a local barbershop not a startup? It definitely solves a problem that real humans have: But a local and finite one. This is where an interesting distinction emerges:

Small businesses are sometimes very comfortable carrying on as small businesses. Which is fine. There is nothing wrong with being a small business owner; in fact, small business owners rarely receive the recognition they should. It is honorable as hell to be self-employed and successfully create the means to provide for yourself and your family.

But a startup must have a different scope and does not have it as the main objective to sustain itself. That is not to say that it isn't a good thing to sustain yourself – of course, it is. But a startup's primary goal is growth. A startup is characterized by an aggressively expansion-oriented business model that seeks to dominate a market as quickly as possible and outrun the competition. When a startup can validate its solution, it is time to scale.

A startup is not a 'thing'; it's a state, remember? In this particular state, you are trying to gulp the most significant problem you can find. The bigger the problem is, the more significant is the potential impact – and that is what a startup is striving towards. A startup should start at "we want to make the world a better place" and then circle in from there. Often, the impact is a bit more modest; but the will and desire to change everything is the driver for meaningful innovation. It'll always be problematic to hit exactly what you’re aiming for, but it is close to impossible to make it big, if you don't in the least aim for something ambitious. To throw a cliché quote of the day: "Shoot for the moon. Even if you miss, you'll land among the stars." All we can say is that clichés are clichés for a reason.

A Startup Needs To Be Dynamic and Adaptive

The world is ever-changing, and the technological revolution is only speeding things up. If a man tragically ended in a coma in 1990 and woke up today, it would be hard for him to fathom that it was, in fact, the same world. And that only 30 years had passed. The consumer landscape has changed entirely. The pace at which people's preferences and needs change is astounding and serves both as the biggest challenge and the cradle of all business opportunities.

We have established that a startup is trying to solve a problem and maximize its impact. But if ‘problems’ and ‘preferences’ are continuously changing, then a startup needs to be able to do as well!

Think about Nokia. Once the most dominating and innovative mobile-telephone company in the world. Do you remember the iconic Nokia 3210? It sold 160 million units and is, to this day, still one of the most sold phones in history. Samsung and Apple didn't stand a fighting chance with the Finish giant that completely dominated the mobile-phone market in 20 years. It’s not even a fable from a long lost present; no, it was at the beginning of this century. What happened to Nokia? The company failed to be dynamic and adapt. Nokia didn't believe that the smartphone represented the future and went in another direction. One decision that forever changed the trajectory of the company. In retrospect, it is kind of strange that a billion-dollar company didn’t anticipate- and react to what today seems like an inevitable change in a sector that they dominated.

But the lesson learned from this example is: If even an established company like Nokia (which is kind of an understatement) can lose grip and become almost obsolete, consider how hyper-important it is for a small company without a big bankroll to adapt to changing market forces. As a startup, you are running an experiment that determines what company you are going to be. Utilize the data the marketplace is feeding you and adjust accordingly. As a startup, you need to possess the flexibility to be adaptive and change direction if needed. Your company is a tool to fix a problem, and as the world- and ‘issues’ quickly change, you need to change with it. That is your ‘Raison d'être.’

If you don’t know what that means, don’t feel bad; we don’t either!

Pivot, Perfect ✅

Now, let’s provide you with a world-class example of a perfect adaptation:

It all started with an American app called Burbn. It was founded in 2009 by Kevin Systrom, a 27-year-old Stanford graduate who previously worked at Google. The young Stanford graduate got inspired by his taste for fine whiskeys and bourbons. The Burbn app allowed users to check-in at bourbon venues, post their bourbon related plans, and share photos of – yes, you guessed it: bourbon. Although location-based check-in apps were popular at the time, the photo-sharing feature of Burbn was something else!Fast forward 12 months, and the whole Burbn thing didn’t really take off. The Bourbon community didn’t appreciate the app, and it seemed that the company slowly drifted towards total irrelevancy. Systrom and his team took a step backward and decided to pivot the platform. When a company ‘pivots,’ it recalibrates coordinates and changes the strategy, direction, and aim; in other words, it adapts.

They stripped Burbn down to its photo, commenting, and "liking" functions. At that time, they renamed their app Instagram, combining the words ‘instant’ and ‘telegram.’ In case that you haven’t heard about Instagram, it is kind of a big deal. Just before Instagram's initial public offering (IPO) in 2012, Facebook acquired the company for $1 billion and cemented what is probably the best ‘pivoting’ in business history.

Let’s Wrap It Up

We hope that all this jibber-jabber about what a startup is has been educational and helpful in some weird way. Truth be told, a startup is a complex concept, and people are entitled to think about it as they so choose.But just to clarify, what is truly important - in our humble opinion - is to make an effort to be unique and try to make a difference. That is your best chance for survival.A startup has to do something that isn't being done – or do something better than is currently being done. Sounds rudimentary? Yes, but you would be surprised at how many entrepreneurs don’t recognize that they are entering a saturated market. It rarely ends pretty. Unless you are Amazon (we assume that you are not) and have a never-ending stream of cash that you can deploy, your best chances are avoiding the blood tainted red oceans and pursuing the deep blue ones instead. Create a unique value proposition and try to make it big.Good luck, Y’ALL! 🚀