Those who are looking to create a startup, or who have one already in progress, tend to have a lot of questions. Most are related to the process of launching itself, such as getting funding, marketing, analyzing data, targeting demographics, development based on demand, ect. All of which are very important parts of running a startup that will remain viable enough to become more.
But only those startups that are beginning to grow will ask the most basic question of all: when does a startup move out of the startup stage and become a company?
The Rule Of Thumb
When you ask this question, you will inevitably end up with a lot of answers. That is because everyone has their own opinion of exactly where the line for this shift in terms is drawn. But most seem to agree on one thing: it has a lot more to do with profit versus staff than anything else.
Probably my favorite answer came from Todd Lipcon on Quora. According to him:
“Classify the company with two questions: Are they profitable? Are they upset about their current state of profitability?
No/No = Startup
Yes/Yes = Startup that is having problems recruiting (“I just wish we had more engineers we could spend this cash on!”)
No/Yes = Failing company
Yes/no = Successful company”
This is a great way to look at it. If you are making enough money through your startup that you are both seeing the numbers go up without worrying about your growth, you are surely a company and not a startup. Not only that, but a successful one.
According to Dobovo Kiev CEO, another way to look at it is your profits versus your reliance on investors. If those people who were funding your startup suddenly pulled out, what would your response be?
Those who answered that they would fly into a panic to find an investor or funding pool to replace them are definitely still startups, whether successful or not. Anyone who said that they would be able to cope and move on are a company that has managed to build a good foundation for themselves.
What do you think the line is between a startup and a company? Let us know in the comments.