Articles - Étudiants SUPINFO
Startups are in the news all the time, often accompanied by large
doses of hype.
But what is a startup, exactly? What makes something a “startup”, as
opposed to a regular old “small business”?
The term tends to be used in the tech industry, but technology is not
the main reason for something to be called a startup. And plenty of
technology firms are not startups: think Google, for example, which may have been a startup 15
years ago but is now a huge multinational corporation.
So a “startup” is something else, different from a “small business”,
and different also from a “tech firm”.
In this tutorial, I’ll give a basic definition of a startup, and then
we’ll look at all the characteristics of startups one by one. As we explore
them, you’ll learn some useful lessons that you can apply not just to
startups but to any kind of business.
Startups, after all, conjure images of growth, innovation, and many
other things that are good qualities for any business to possess. So whether
you’re trying to launch the next Google from your garage or to make your
regular old Mom and Pop store more successful, there’s plenty in here for
you to learn from. At the end, we’ll also look at the process of launching a
Wikipedia definition :
“A startup ... is an entrepreneurial venture or a new business
in the form of a company, a partnership or temporary organization
designed to search for a repeatable and scalable business model ...
the essence of startups is generally related to the concepts of
ambition, innovation, scalability, and growth.”
One thing Wikipedia doesn’t really address is when a startup stops
being a startup. I think we can all agree that Google was a startup in
1998 and it isn’t one any more, but when did that change occur?
There’s no clear dividing line: it’s not about reaching a certain
age, a certain number of employees, or a certain dollar amount of revenue,
profit, or assets. Perhaps it’s the moment when that “search for a
repeatable and scalable business model” ends, and the focus shifts towards
implementing that business model as effectively as possible.
There are a lot more factors involved, too, and we’ll look at them
in the next section. By the end, you’ll have a clear idea of the main
characteristics of a startup, and that will give you a much fuller
definition of what a startup is (and isn’t).
Characteristics of a Startup
So now that we’ve arrived at a basic definition, let’s expand on it
by looking at the main characteristics of a startup. There’ll be a
subsection on each of them in turn, and then afterwards we’ll look at the
lessons we can learn, both for startups and for other types of
Startups exist to grow. If you start a plumbing business, just
making enough profit to support your lifestyle may be enough, but a
startup aims much higher: some people say a startup should be growing
5-7% a week.
Of course, that’s just an estimate, and actual growth rates vary
widely, not just between companies but also at different phases of a
single company’s life. A startup may not grow at all in the beginning,
when it’s still figuring out its business model and how to execute it.
Then it will, if all goes well, hit a phase of rapid growth. But, of
course, 5-7% a week is not sustainable forever, so it’s likely that
growth will slow in later years—that’s happened even with success
stories like Twitter and Facebook. Slowing growth is one of the signs
that a company is transforming, or has already transformed, from a
startup into a mature business.
But although growth in a startup may be uneven, it’s an inherent
characteristic of a startup, and a key factor that differentiates
startups from other businesses.
It goes back to that “scalable business model” mentioned in the
definition. A service-based business like a photography studio or web
design business is often not very scalable. You’re providing a direct
service to as many customers as you can, but at some point there’s a
If you hire more people, your business can grow, but it’s tough to
achieve the kind of turbo-charged growth that would warrant the
artups, on the other hand, usually have a business model that’s
highly scalable. Snapchat, for example, went from zero to more than 100
million users and a valuation of $15 billion in less than five years.
That’s a very scalable business model. When a new teenager signs up and
starts sending photos around, there’s little incremental cost to the
company, so it can grow very quickly.
Snapchat did have to upgrade its technology to handle higher
volumes, and has hired some new people as the company gets larger, of
course, but rapid growth is much easier than with other types of
business. Imagine serving 100 million clients in your web design
business, and you’ll see the difference. High growth is not just an
objective of a startup—it’s a key component of its business
To achieve that high growth, startups usually do things
differently. That doesn’t necessarily mean inventing a whole new
industry, but it does mean taking a markedly different approach to the
companies that are already established.
When Google started up, for example, a search engine was not a new
idea. Other companies like Yahoo, Lycos and AltaVista were already up
and running, with a few years’ head start and boasting large user
What Google did was to take a different approach, building a
search engine that was based not only on the content of the page but
also on its authority, judged by how many other authoritative websites
were linking to it. It delivered more relevant results, with a simpler
interface than its competitors’ cluttered “portal” sites, and achieved
huge user growth as a result.
So a startup usually has a clear idea of how it can disrupt an
existing industry. It’s not just aiming to be another company; it’s
aiming to dislodge huge, established competitors by doing things
differently, and doing things better.
Again, that’s different from a regular small business. If you open
a café, you’re probably not aiming to overturn the café industry and
rewrite the rules on how cafés are run. You’re probably just hoping to
serve good coffee, be popular with your customers, and create a
successful, sustainable business—very worthy aims, of course. But a
“coffee-shop startup”, on the other hand, would probably have an idea of
doing things so differently that it ends up growing super-fast and
Starting a business—any kind of business—can be a huge and
all-consuming endeavour. Most people who do it are very committed, and
end up working long hours and putting their heart and soul into making
Startup founders often take this passion and commitment to an even
greater level. Here are a couple of quotes from startup founders,
courtesy of Y Combinator co-founder Paul Graham:
“I didn't realize I would spend almost every waking moment
either working or thinking about our startup. You enter a whole
different way of life when it's your company vs. working for someone
“It's surprising how much you become consumed by your
startup, in that you think about it day and night, but never once
does it feel like ‘work.’”
Successful startup founders manage to communicate that passion to
their staff as well, so that employees become similarly obsessed.
Because startups usually have lofty ambitions and innovative methods,
it’s easier to energise people than it is with a more traditional
In the book Creating Passion Brands, Helen Edwards and Derek Day
describe the obsessive commitment of Google employees in the startup’s
early days, observing:
"Super-bright people aren’t ‘fanatical’ just because the
company provides a pay cheque each month. Science PhDs don’t
‘obsess’ just because senior management demands it. For Googlers,
the motivation to break records, improve and invent has to come from
something other than purely commercial considerations, something
loftier than adding a few more dollars to the share price. That
‘something’ is the all-pervasive belief at Google that what the
company does really, really matters."
You may or may not agree with the loftiness of Google’s mission,
but the company’s ability to infuse its early employees with this belief
was a key factor in its success.
Startup employees aren’t only committed because of idealism. Stock
options also help.
In fact, when startups are hiring new employees, particularly in
the very early stages when they don’t have much funding, they may not be
able to offer very high salaries. What they offer instead is the chance
to take a real, monetary stake in the future of the company, potentially
enjoying a huge windfall if it takes off.
Who wouldn’t want to have got in on the ground floor at a startup
like Google or Facebook, or, further back, Apple or Microsoft? Back in
1992, The New York Times ran a story on Microsoft’s Unlikely
The base pay at Microsoft, for technical and marketing people
alike, falls well below the industry average. But that doesn't mean
millionaires are lacking. The reason is a generous package of stock
options, granted to more than half of the company's employees based
on seniority, position and value to the company.
Well before the company went public, Microsoft's chairman,
William H. Gates 3d, allowed many employees to buy stock for $1 a
share. When the company did go public in March 1986, it was at
$25.75 a share. A year later, it hit $90, sending out the first wave
Of course, not all startups are as successful as Microsoft. But
the pattern is the same across the board: base pay may not be that high,
but both founders and staff are often heavily invested in the company’s
future. If the startup succeeds, they get rich. That makes them strongly
aligned with the goals of the company, and encourages people to go the
As we discovered earlier, the startup’s idea is critical. But what
people don’t always realise is that this idea can change over time, and
the first idea is not always the best one. Startups have the flexibility
to change course drastically until they hit on the right business
For example, Twitter’s founders were originally on a different
track entirely. They developed “twttr” as a side-project for their
podcasting startup Odeo. When they realised the potential of Twitter,
they focused on that, spinning it out as a separate company and putting
Odeo up for sale.
This willingness to “pivot” differentiates startups from other
companies. Often a more established firm will have invested so much in
supporting its existing business model that it can’t change, or can only
do so very slowly. The decline of Kodak is a classic example—the company
more or less invented digital photography back in the 1970s, but was so
dependent on film that it failed to take advantage. It couldn't change,
so it couldn’t benefit from the digital revolution.
A startup, on the other hand, is young, and it can change
direction easily. Even during the process of building a product, it will
often test, evaluate and change direction as needed.
This is often referred to as a willingness to fail, or to “fail
fast”. Facebook’s mantra in its startup days used to be:
As it has become a mature business, Facebook has moved away from
that approach, but it worked spectacularly well early on.
Funding tends to work a little differently for startups too. In my
series on Funding a Business, I covered a range of strategies that will
work for most businesses, from borrowing money to crowdfunding.
But startups are funded for growth. They often seek large amounts
of investment at an early stage—asking investors to take high risks,
with the promise of rapid growth and a spectacular payout.
So if you’re launching a startup, you’ll often need to approach
angel investors or venture capitalists early on, and even private equity
firms will often get involved much earlier than they would with other
You’ll need to be ready to pitch your idea to investors in a
professional way.And of course you’ll need a website for your startup
Having a good idea is no good unless the company can execute it.
Startups work hard to attract talented, often young employees to work
This hiring will often take place at an earlier stage than with
other businesses, sometimes when there’s nothing more than the idea to
work from, and it also has a different focus. With a regular business,
you’re often hiring people on an as-needed basis as the business grows,
but startups often recruit people to bring their creativity in helping
to refine the idea.
Sole founders do exist, but it’s much more common to see teams.
Even when there’s a highly visible figure associated with starting the
business, there was often a team of co-founders. Facebook’s Mark
Zuckerberg, for example, was a co-founder alongside Eduardo Saverin,
Andrew McCollum, Dustin Moskovitz, and Chris Hughes, all of whom
contributed to the startup’s success.
Startups are able to attract talented people not just because of
the commitment and financial incentives that we talked about earlier,
but also because they often lack the fixed processes and rules of larger
corporations. They’re able to create a more fun, flexible work
environment in which people can be innovative and take risks.
Lessons to Learn From Startups
So those are some of the key characteristics of startups. But as I
mentioned before, they’re relevant to all types of business. Even if you
run or work for a more traditional company, there’s plenty you can learn
from the startup world. Let’s go through each of the characteristics in
turn, and look at what lessons we can all learn from startups.
Not every business can grow as quickly as Snapchat. But every
business can incorporate some high-growth elements into their mix of
products and services.
Think about your business, and ask how much of it is scalable and
how much of it isn’t. Then brainstorm ways in which you can increase the
For example, if you’re in the graphic design business, most of
your business is probably not scalable. You can only work with so many
clients at once, after all. One obvious way to scale up would be to hire
more designers, but another way is to alter your product mix.
Maybe you could package up some of your designs and sell them
online, or produce a range of ebooks, courses and other items that you
sell either through your website or on a marketplace. This kind of
business is scalable in that once you’ve created the digital product,
you can generate additional sales without doing additional work.
Sure, this isn’t going to make you the next Snapchat—that’s not
the goal here. The idea is to take a few principles of startups and
apply them to your business. Think about how you can alter your business
mix to do things that can scale up quickly. Maybe you could even set up
a digital marketplace of your own!
To be successful in business, it’s not necessary to do things so
differently that you disrupt an industry as startups tend to do. But it
is necessary to be clear about how you differentiate yourself from
what’s already out there.
So think about why your business exists, and what sets it apart
from the competition. It doesn’t have to be anything truly
ground-breaking: it could be that you focus on a particular type of
client, or provide more services than your competitors, or that you
offer a guarantee when others don’t.
Think about what that book said about the “all-pervasive belief at
Google that what the company does really, really matters.”
If you have employees, do they feel that way?
It’s a tough question, because of course it’s easier for startups
to motivate their employees with the thrill of covering new ground,
growing extremely quickly, and disrupting an industry. But again, you
can incorporate elements of the startup experience into any
Think about why you do what you do. As I mentioned, most business
owners—not just startup founders—are extremely committed to their
business, and they’re often very passionate about it. The trick is to
communicate that passion to your staff and to show them why they should
feel proud to be doing what they do.
This is an easy one for any business to implement. Even if you
don't have a full-scale stock option plan, you can quite easily create
incentives for your employees.
You could pledge, for example, that when the company hits its next
profit milestone, you’ll give everyone a share of that profit.
Incentives don’t have to be costly, either—you could give people extra
time off, or any kind of non-monetary perk that you think they’d
The idea is simply to get your employees’ goals aligned with your
own and those of your company. If the company does well, your staff
should benefit in some way.
You don’t have to move fast and break things, but an important
lesson to take from startups in this area is that any business needs to
adapt to change. Be ready to change direction as needed.
So even if you’ve invested a lot of time and resources in a
particular product or service, accept that you may need to change tack
if it’s not working.
Diversifying helps a lot with flexibility.So whichever field
you’re in, try to look ahead and see what changes could affect you.
Don’t get too dependent on one product or one type of client—embrace
change, keep your skills and those of your employees up-to-date, and be
ready to pivot.
The funding strategies used by startups are generally predicated
on promises of rapid growth, so most won’t be applicable to other
You can, however apply the principle of being funded for growth.
Companies often raise just enough money to launch and stay in business,
and stop there. But you could look out for more opportunities to raise
the funds that would help you grow more quickly.
For example, you could run crowdfunding campaigns to fund new
products. You could consider borrowing, if it’s affordable, to invest in
better equipment or some other business improvement.
Or you could look for wealthy investors to take a stake in your
business. Startup founders are usually willing to give away large stakes
in their ventures in exchange for the capital that they know will help
them succeed. You could apply the same principle to your own
Startups often place a huge emphasis on attracting the best and
the brightest, and actively start recruiting from an early stage. Here’s
why, from the mouth of Steve Jobs:
Of course, everyone wants to hire the best, and it helps when you
have high growth prospects and/or access to a large pile of venture
capital cash. But within your available resources, you can incorporate
the startup principle of seeking out the smartest people you can find,
and then trusting them to take your business to the next level. To do
that, you’ll also need to learn to let go—something entrepreneurs are
not always very good at
Now that we’ve seen the characteristics of startups and what you
can learn from them, let’s look at the process of launching a startup.
It’s a big subject, so I’ll just give an overview here, with links to
other articles and series where you can find more detail if you want
You have to come up with a startup idea worth pursuing, and you
also have to qualify this idea by testing it quickly and with little
investment. As we’ve seen today, the idea needs to be scalable, offering
a new solution to a problem people face, and creating the potential for
In this tutorial, you’ve seen that the definition of a startup is
not just about being small or new, or about being a tech firm. It’s about
a whole set of characteristics that differentiate startups from other
businesses, from high growth and innovation right through to flexibility
and a willingness to fail.
If you want to launch your own startup, you’re now in a better
position to do so with everything we’ve covered today. And if you just
want to run a traditional business more effectively, there’s plenty you
can learn from startups and can begin incorporating into your own