It’s time to rethink the definition of «startup.» Here are some metrics to help you gauge when your company is no longer a startup.
Is it time to evolve the definition of a startup? I found myself thinking this when LinkedIn announced its top startups for 2018. I was most surprised to see Lyft on there — considering the company has a global headcount of 3,000 and passed more than $1 billion in revenue last year. That is quite the startup.
Looking back at last year’s list, Uber and Airbnb were on there when they were valued at $68 billion and $29.25 billion, respectively. Thousands of employees. Big-time valuations. Not exactly what you think of when you hear the word “startup.”
The definition is clearly shifting. I have also seen it play out first-hand. I am co-founder and CEO of Aha! — we are among the fastest-growing companies in U. S. The company is five years old and we have nearly 100 employees. We serve more than 5,000 paying customers and 200,000 users. We are bootstrapped and profitable.
Is that a startup? No. To me, a startup is a company that is still unproven — its product, market fit, and leadership. A startup is still striving to validate that its business model is viable.
I figured it would be good to hear what others think, so I put a callout on social media asking how people define a startup today. I got some thoughtful answers that ranged from pointed (“a temporary organization used to search for a repeatable and scalable business model”) to numbers-driven (“a business in years 1-7 with less than 50 team members that has continually experienced revenue growth over 20 percent year over year”).
For me, it is the striving part that is exciting to watch — watching a company start with an idea and go on to build something that provides real customer and employee value (and generates lots of revenue). But even more exciting than the striving is to realize when a so-called startup has emerged as a meaningful, established company that will last.
Defining exactly when that happens is hard, and it is why so many exceptionally large companies are still considered to be starting out. So, it may be useful to set some benchmarks that we can all agree on.
My team has realized a number of these milestones, which is why I have stopped calling us a startup. And yes, this is despite some still thinking of us as a startup. In fact, we were on LinkedIn’s list this year alongside Lyft.
Here are some metrics I use to determine if a company is no longer a startup:
5-plus years in business — A company has spent five years pursuing the same customers and market.
1,000+ paying customers — A company has found people who are willing to pay for their solution. (For enterprise solutions with a really high price point, it might only take 100 customers to prove there is real value in the offering.)
$50M+ in annual revenue — A company is solving a real problem, and as a result, customers are paying a meaningful amount for it.
100+ teammates — A company has a sizable team that covers most of the core functions that a high-growth organization needs to scale.
Of course, for emerging companies, different milestones are achieved at different times. For example, highly funded companies reach 100 employees years before they reach $50 million in revenue. The above metrics are simply leading indicators that a company is solving a real problem and will be successful over the long haul.
But when most (or all) are reached, this is when you can say with confidence that a startup has grown up and will last.
Brian de Haaff is founder and CEO of Aha! His previous two companies were acquired by Aruba Networks and Citrix, respectively.
