When does a startup stop being a startup?

There’s an inevitably cool vibe about startups – they’re all purpose and passion and striving with a fevered brow, with a few fun things like foosball tables, massage chairs or golf simulators scattered around the office.

But when does a startup stop being the ‘cool kid’ and grow into an adult? Is it a matter of profitability, age, revenue or culture?

Is it simply a question of attitude rather than something measurable?

Of course, a Google search turns up a heap of answers, including TechCrunch editor-in-chief Alex Wilhelm’s 50-100-500 rule. That rule says you stop being a startup once revenue exceeds US$50 million, you have 100 or more employees and have a valuation of US$500 million. 

Sean Peek, a contributing writer at business.com, wrote last year that a startup is still a startup if it’s still testing markets, working on branding details, or hiring integral employees.

Conversely, he wrote it is no longer a fledgling business if it’s acquiring other startups, making products for the current market, and has become bureaucratic.  

Goodbye golf simulator, hello golf course.

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Social media shout-out

Caffeine put out a cry for help on social media, which attracted a few answers and a new term: “stayup”. 

Punakaiki fund manager Lance Wiggs said one definition was: “When it’s sold.”

Others saw it more as a matter of founder choice. 

CarbonCrop CEO Jo Blundell said it depends on the founders’ ambition, the culture they want to retain and the market opportunity.

“I remember Xero calling itself a startup when it had +1k employees and +500k customers. A startup could technically be in scale-up mode, but do people refer to themselves as ‘scale-ups’? 🤷🏻‍♀️In my view, Timely was a ‘startup’ till its acquisition. Also, we wouldn’t want to narrow Caffeine’s target market, eh!”.

Advisor Jacob Lawrie took a similar view, saying it is more of an internal cultural mode and set of values, heavily influenced by where the business is at relative to some kind of shared definition of success such as revenue, company purpose/mission, acquisition, etc. 

For example, a $50 million revenue business could consider itself a startup if it had a $1 billion goal. A $50 million revenue business could also consider itself fairly mature because it is near a specific valuation or acquisition goal. And the same business that is focused on healthy profitability probably isn’t a startup, he said.

Tristan Roberts, business partner of Ethique and Incrediballs founder Brianne West, said entrepreneurial spirit and ability to adapt are qualities that can keep a company in a constant state of evolution. 

“Regardless of a business’ success, staying competitive and relevant in our dynamic business landscape requires embracing changes and innovation. In a way, the essence of being a 'startup' can continue to exist as a company grows and succeeds. We know that in our fast-paced business world, staying nimble and open to new opportunities is essential for long-term sustainability and growth.”

West chipped in that she has pondered this question a lot. Ethique was profitable before she would have called it a 'stayup', so she wouldn’t tag the change to that.

“Is it the period of no longer chasing hyper-growth? No longer sleeping on the floor of your office working 14 to 16 hour days? No longer needing to raise capital? Tricky one. I suspect there is no one size fits all.”

Jacky Laverty – a mentor, investor and cheerleader for purpose-driven startups – said any organisation that is customer-centric, delivers a relevant solution to an existing pain point, stays flexible and adaptable to the ever-faster changing markets and customer needs will morph – exponentially or organically – into a ‘stayup’. 

“As long as it delivers value to its customers, stakeholders and the wider society (tax and employment). Thus, independent of its valuation in $$ terms. Linear measures don’t cut it for me as they differ anyhow by global regions, market size, specific industry, cultural factors and reach (global/local).”

One measure could be how successful the organisation is at solving a major problem or desire for its customers rather than size. 

Another that would indicate it is not a startup anymore is as soon as it cracked the code, organisational structure and company culture of how to survive financially.

“Therefore, the ‘status definition’ might only matter for justifying the increased valuation and for the price-tag upon an ‘exit’,” she said. 

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Hit by a bus and measuring magic

Business, innovation and commercialisation advisor Brett Roberts’ definition was when the startup could survive the founder(s) being hit by a bus.

SetSeed co-founder and CEO Chris Parnell added his startup had literally coded a hit-by-a-bus scenario in its licensing server.

“Does this mean customers get better value if they assassinate us?” he posed.

Recruiter Troy Hammond and Caffeine commentator and startup investor Serge van Dam both like the 50-100-500 rule from TechCrunch, though van Dam added, “experientially, as Brett Roberts says, when you can survive the departure of the founders without much pain.”

Experienced angel investor Suse Reynolds says startups are a mash-up of stuff, and the definition depends quite a bit on context – whether it’s for setting policy levers, awards, media, or attracting the right talent.

“In a mess-with-your-head kind of way, I do think much of what defines a startup isn’t measurable (age, growth rates, revenue, number of employees). It’s way more about attitude, energy, ambition for value and impact creation. Measurable stuff is part of it, though. If only we could measure magic – all startups are a wee bit magical!!”