business-structure, structureAs the title suggests, at what point does a startup cease to be classed as a startup?
Financial metrics like top line revenue and profitability are certainly important markers, but I think it’s also a state of mind/company culture phenomenon. It happens when you have a team, and a corporate structure in place that has a long term mindset and the capability to operate at a much larger scale. I know many companies I would describe as “mature” companies, that are still small. They just have a capable team and a culture that is long term focused.
“We’re the biggest startup on the planet” - Steve Jobs (Apple)
There’s no fixed moment. But here are a few indicators:
You have identified your product-market fit and figured how to approach and close new clients; it’s all about scaling your reproducible sales model from that point forward.
Your growth rate slows down significantly.
Your operating margin begins to dive.
Everyone in the team has a very precise job description, rather than fingers in everything.
It takes three months or more to get anything done or purchased.
You grow past 100-150 employees. (You can’t know everyone in your team past 150. See e.g. how GoreTex operates to work around this.)
The board decides to replace the CEO/founder with a fancy CEO/MBA.
Office politics straight out of Dilbert cartoons is all over the place.
Like many things in life, the answer is: it depends on your definition of term “startup”.
According to Eric Ries: “A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty”. So if your startup is no longer operating under extreme uncertainty (successfully validated the business model and product is being delivered) you are no longer a startup.
According to Ycombinator a startup is an enterprise projected for hyper-growth. I guess you are no longer a startup when you can’t grow fast (reached market potential). So Facebook is not a startup anymore because it already ate the world.
If your definition of startup is just a business that is starting, you are no longer a startup if you are established as a business.
I think one important thing is culture, when company culture is no longer a startup culture than you are not a startup longer ;)
The answer to this question will change depending on the type of funding the startup is receiving (grants, outside investment, loans) and the exit strategy (e.g. merger).
An analysis of the fundamentals of the company (cash flow, debt/income ratio, sales, profit) that shows the business is sustainable and can pay its debts over the next five years would be a strong indicator that the company has moved out of the Valley of Death and into normal operations.
Some People say that once you’ve reach the $1B valuation, you are no longer a startup.
Some say when you IPO, you’re no longer a startup, which is obvious.
There are no more ‘risky assumptions’ to test and you have a proven business model. i.e. that you have a money machine.
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