Have you ever wondered, what is a startup and what are the types of startups?
Therefore, as leaders in the space, StartupDevKit is setting the record straight by defining what is a startup and what isn’t a startup. We’re also sharing the different types of startups as these two topics are relevant to each other.
What is a Startup?
A startup is defined as a new business that is creating a product or service that’s somewhat easily scalable to create large profit margins. It fixes a problem in a market, fills a need in a market, and/or creates an entirely new market. They generally achieve lots of growth, are transformative, and are up to around five years old.
Startups don’t have to be a tech startup, but most are. Ones that are not software-based usually have physical products or services and often need inexpensive solutions to make and sell them so they can scale.
What’s Not a Startup?
There are agencies that sell marketing services, web development, software development, and public relations services starting every day. They call themselves startups. However, agencies are not real startups because they aren’t filling any gaps or needs by a market and are not easily scalable.
That’s also because they have lower profit margins due to higher costs for paying employees. Therefore, an agency doesn’t qualify, nor would a new local business be considered one, either.
Small business “startups” are not designed to scale easily, so they are unlikely to be a “real startup,” as I would call it.
Industries and Sectors of Startups
In addition, there are a lot of different types of startups that come from different industries. Steve Blank says there are only six types and considers new local businesses to be startups, too. I very much disagree. There are a whole lot more.
Below is a list of the majority of different verticals that startups fit into. Many of which are tech-based startups.
- AdTech – Advertising tech
- AgTech – Agriculture technology-based startups
- AI – Artificial intelligence
- ClimateTech/CleanTech – Climate & clean tech solutions
- Cloud Infrastructure
- Consumer Health
- Consumer Internet
- Consumer Software and Hardware
- Creator/Passion Economy
- Data Services
- DeepTech – tech solutions based on overcoming substantial scientific or engineering challenges
- Developer Tools
- Digital Health
- Direct-to-Consumer (DTC) – when a brand or manufacturer sells its own products directly to its end customers without a third party.
- Drug Delivery
- E-commerce – Think online marketplaces like Amazon or Rakuten
- EdTech – the combined use of computer hardware, software, and educational theory and practice to facilitate learning
- Enterprise SaaS
- FoodTech – Scientifically creating foods or components of foods which are usually attempts at healthier solutions
- HealthTech – Healthcare-based startups with a focus on harnessing technology
- Intrapreneurial startups – New product or service lines of business created within an established company who are innovating in our ever-growing and ever-competitive market.
- IoT – Internet of Things (Hardware)
- LegalTech – Legal-based technology solutions
- MarTech – Marketing technology
- MedTech – Medical device tech startups
- Membership-based startups
- PropTech/Real Estate – Property technology-based
- SaaS – Software as a service
- Sales & CRM
- Smart cities/UrbanTech – Urban technology, urban transportation, and urban real estate technology startups
- SMB Software
- Social Commerce
- Social Impact Startups – Mission and cause-based startups
- Social Networks
- Supply Chain Tech
- Wellness & Fitness
When Does a Company Stop Being a Startup?
Startup age is somewhat correlated with whether a company remains a startup or not. I consider 3 to 5 years of age to factor into whether or not a startup stays a startup.
On the other hand, we also have maturity via growth and milestones.
For instance, when a startup reaches product-market fit and is able to scale significantly without reverting back, then it stops being a startup and becomes a growth-stage company.
It really depends on the circumstance, but once a startup raises Series B funding, then I’d definitely call it a growth-stage company at that point.
The word startup is so loosely used by so many people, that some folks in the industry use it synonymously for any company under ten years old, even if it’s not really a startup anymore.
Are Startups Easy to Build?
I’d be lying if I said startups are easy to build and grow. They’re far from it. The reality is that 90% fail. Few people think it will happen to them. But the odds are against everyone.
To successfully build a sustainable company, they require education, strong teams, planning, passion, vision, discipline, emotional intelligence, drive, creativity, adaptability, and great products or services that people don’t want to live without.
In addition, I’m taking action to fight against the brutal reality of startup failure. I’m releasing a book soon called Startup Survival Secrets. In the book, I break down the top 20 reasons why they fail with root causes for each one of them, how to prevent them, and what to do instead. I finished the manuscript but I’m working on editing it now.
A startup isn’t really a startup unless something that can be scalable. If it’s not scalable it’s just a new business or it’s a business idea. Startups drive innovation in our economy worldwide and are responsible for many of the technology enhancements we see today. If you’re not creating something innovative, then the chances are that you aren’t creating a startup, but rather a new business.
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