"A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed” - Neil Blumenthal, co-founder of Warby Parker
What is a startup?
"I know startups! Those companies where you can clock in at 10AM, work on a couch in sweatpants, sip free craft kombucha, and take ping pong breaks twice a day."
I'm not going to argue with you about wanting that kind of work culture. Kombucha is awesome. But aside from a relaxed and progressive working culture, you should know what a startup looks like from a business perspective.
There are a lot of companies out there that pose as startups by offering similar cultural perks but can't provide the same career growth opportunities that a real startup can.
I love this quote and I think it really captures the essence of a startup. Let's look at how this definition can be used in practice. Take a look at this example company:
Marco's Pizza parlor is a new restaurant (9 months old) with 10 employees funded personally by a local chef with an initial investment of $250,000.
Is this pizza restaurant a startup?
It's a young company with funding and a small team. It sounds similar to a startup and if we look at Neil's definition it meets the requirement of "success is not guaranteed". The restaurant industry is brutal and 17% of restaurants close within the first year of opening.
But alas, we would call this pizza restaurant a small business and not a startup because the solution to running a restaurant is obvious.
The business model of a restaurant is tried and true. Make great food at competitive prices with a location and ambiance that is attractive and you have a restaurant business. It's certainly not easy, but it's been done before and we know it can work if the market conditions are right and it is executed well.
What about this company?
Zume Pizza is a (real) robotics company that designs and manufactures a robot pizza chef. Their pizza bot handles the pizza making process from start to finish by kneading the dough, spreading the sauce, adding the toppings and baking the pizza to perfection. At this point, they have a small team, funding, and a working prototype.
This company is looking to solve a problem (saving pizza parlors time and labor costs through automation) where the solution is not obvious and success is not guaranteed. Aside from the engineering challenges in making a market-ready robotics product, there are a host of other unknowns. Would people eat pizza made by machines? Would they be able to make the robots at scale at a price point that could attract customers? There aren't any other pizza robot companies out there to offer a market validation.
This new technology brings a fundamental change to the restaurant industry by seemingly replacing pizza chefs. It's an innovation that could forever alter the business model of pizza parlors by changing the economics of their operation. Zume pizza is a certified fresh startup.
While I hope this example illustrates the general idea of a startup, truth be told there's no precise definition for a startup in terms of team size, funding, maturity or any other hard metric.