The term “startup” is often generically used to describe a fledgling company, from the local corner store to a large tech-focused company aiming to be the next unicorn. However, despite its widespread use, there really isn’t a formal definition or criteria for what constitutes a startup.
This loose interpretation of the term leads to confusion over what exactly differentiates a startup company from other forms of new businesses. For example, is a brand-new restaurant or retail store a startup, or is the term reserved only for innovative technology companies funded by venture capital?
Despite the lack of a consistent definition, I think Steve Blank, a well-known person in the startup world, has done a pretty good job explaining the different types of startups.
Let’s break each of these down.
Lifestyle Startups
A lifestyle startup is one where the founder(s) create a business around something they love doing. It’s more about living a particular lifestyle than making it big. Think of a person who loves surfing starting a surf shop. They’re in it because they love surfing and want to have an avenue to fund their lifestyle by doing something they love.
Small Business Startups
Your everyday small business, like grocery stores, hairdressers, consultants, and electricians fall in this category. People who start these businesses have useful skills and want to work for themselves and make a living. This type of startup isn’t one that typically grows very large, but they’re often the backbone of their local economy.
Scalable Startups
The main goal of a scalable startup is to develop a unique product or service and bring it to the market. What sets scalable startups apart from other startups is their focus on innovation, aiming to introduce something new or significantly improve an existing idea.
These early-stage startups often require outside seed capital, typically from angel investors and venture capital, and aim to grow big and fast. Think of companies like Facebook or Google in their early days. They start small but aim to become giants in their industry.
Buyable Startups
These startups are designed to be sold to larger companies. Often, they’re tech companies with a unique product or service that a big player in the market would find valuable. The goal isn’t to build a company for the long term but to create something attractive enough to be bought by a larger company.
Large Company Startups
These happen within big companies when they create new products or services in response to a changing market. Think of a well-established company like IBM developing a new tech solution. These startups have the resources of a large company behind them but the energy and innovation of a startup.
Social Startups
These businesses are more focused on making a difference, not making a profit. The aim is to provide solutions to social issues while being sustainable in the long run. They might look like traditional businesses, but their primary mission is social impact rather than profit.
