Remember, you're quoting from a newspaper. Word "startup" in tech crowd (and thus, in media) means "sexy", "hip", "new", "innovative", and is a label you wear to associate with the sexy crowd (as opposed to the old, fossilized world of typical companies and corporations). Some of the features of this community are:

- the thing to brag about at meetups is not profit, but investor money taken and burned

- you need to grow very fast, because it's how you get investor money

- you ain't going to have a profitable business anyway, so you need to have a plan to sell your soul (and users), aka. "an exit"

- working overtime for free is justified, because "startup!"

etc.

But the primary reason for calling yourself "a startup" seems to be the association with "sexy and innovative crowd". You lose the label when you've been around so long that you make a profit and have other startups competing against you.

Evidence: I don't see companies bragging about being "Small Businesses", which would be a legal term.

I've come to understand a startup as a company that doesn't want to pay overtime.

Nah, that's pretty much the entire industry, even the ones that don't call themselves startups anymore.

That couldnt be more incorrect, from my own experience at least where i live.

Every salaries job I've ever worked has put me in as an "exempt" employee, paid for the job I do and not the hours I work, so not eligible for overtime. This includes non-tech companies who have been in business for over 100 years, across three states.

It's pretty standard when you're a salaried employee.

Counter anecdote, I was an exempt salaried engineer at General Dynamics, and got paid time and a half for every hour over 40, if I worked more than 45 hours per week.

It boosted my annual salary noticeably, because we worked 45-50 hours nearly every week. I hear that the OT policy still exists, but few people still get OT because of the DoD sequester. But in 2010-2012, it was very nice.

That's completely up to the discretion of your employer. The reason for classifying an employee as an exempt employee is to exempt them from the Fair Labor Standards Act, usually with the goal of excluding them from demanding overtime pay. I'm not sure what the benefits are for classifying someone as exempt but then still giving them overtime pay.

I ask you for greatness and this is the comment you leave?

It would be better to demolish the hip/sexy part of the 'startup' phrase in mainstream media. Recently I've started to put more emphasis on the definition that Dave McClure gave on quora about a year ago:

    A 'startup' is a company that is confused about:
    - What its product is.
    - Who its customers are.
    - How to make money.
    As soon as it figures out all 3 things, it ceases being a startup and becomes a real business.

http://www.quora.com/What-is-the-proper-definition-of-a-star...

I think this is really a clever way to define a startup, it is true to the experience, and takes away the hype.

Any company that has yet to be 'self sustaining' (which is to say a Going Concern in accounting terms) is a start up as far as I am concerned. Until it reaches the point where it generates enough money to keep operating without additional outside investment, it is in danger of going out of business when that outside investment ceases to be available.

There a loads of companies who don't need outside investment to sustain operations but take it anyway to "inject capital for growth". If I build a SaaS that nets (profit) me $5k/month for a whole year, does that mean it's not a "startup" anymore?

Being a startup or not doesn't protect you from poor management choices :-). Companies that don't need outside investment any more are no longer start ups. Getting some additional capital to expand it not fatal if they can't secure it, they just can't expand. For a start up if they can't close the next round of funding, they die.

Answering the next question is a bit trickier. You said "nets (profit) me $5k/month" which can be interpreted in a number of ways. So I'll answer with the two most common interpretations.

If you're SaaS business can pay you and anyone else needed to run it, a salary and some benefits, and at the end of the year, after accounting for depreciation of assets, expenses, and taxes is $5K in the 'black' (so the LLC, S-Corp, what have you, could 'bank' that $5K for future expansion) then no it isn't a start up any more. It may be a boutique business but its a going concern.

If you run a SaaS business with no employees, and use the revenue to pay your living expenses, have no benefits and you happen to end up with $5K unspent at the end of the year, its more of a consultancy than a startup.

Good examples in an adjacent field are accounting companies versus accounting consultants. My mother-in-law ran her own little tax accounting business for years. Not a startup (it was self sustaining) but not large either.

If I build a grocery store with similar net profit, revenue, etc, is it a "startup"? why should your SaaS be?

The term is not well defined, and basically meaningless; but I think a definition that would resonate more closely with most people is "a company whose meta-strategy is to expand like crazy, whose strategy is flexible, and who is not yet an industry pillar".

Indeed it does. The startup thing to do when faced with a $5k surplus is to spend $50k on marketing. Remember, you don't want to build a sustainable business, you want to make an exit or die trying.

>make an exit or die trying.

Or grow a sustainable business from something small to something huge that produces a lot of cash along the way while your enterprise value increases ahead of a large exit (or die trying).

I've noticed Paul graham and others redefine startup to refer to companies with large growth rates.

In this case, if the company is still growing quickly 6 years in, maybe its still a startup?

Interesting, I've seen a lot of definitions for a startup now, but none of them really seem to grasp the core of it. Startups have repeatable business models, large growth rates, but Amazon is that and it's not a startup anymore. I like the above description that a startup still is confused about its product, customers and how to make money.

So what about Uber, Airbnb, Dropbox then for instance? For me Airbnb and Dropbox are definitely startups still, however Uber not anymore, even though they have similar size.

Why is that, is it the culture, where flat hierarchies are combined with high-growth rates? This is not the case with Google, definitely not Amazon, Apple, Facebook anymore, however, it is the case with Dropbox with 979 employees and AirBnb with 1,876 employees. Uber has 2,625 employees, are they already out of the startup size that is maybe 2,000 employees?

I've come to understand "startup" to mean that the company is the product.

Seeing as the average life expectancy of a Fortune 500 company is 40-50 years[1], it's not unreasonable to consider a 6-year-old company to still be in the "starting up" phase of its existance.

[1] http://www.businessweek.com/chapter/degeus.htm

Looking at it from this angle, one has to observe that we not only do have a terribly high infant mortality rate; many seem to be spawned with the sole purpose of becoming child sacrifice. (Moloch the Great Acquihirer).

"A startup is an organization formed to search for a repeatable and scalable business model." - Steve Blank

http://steveblank.com/2010/01/25/whats-a-startup-first-princ...

> repeatable

Yeah, they've done that. If you do an exit and kill the product, the original need of users is left unfulfilled, so there's a space for someone else to do the same trick again.

Peter Thiel defines a startup as such in Zero to One - A startup is the largest group of people you can convince of a plan to build a different future.

So is that different future one where there will be further penetration & distribution of existing Square products or will we continue to see Square more horizontally integrate services for businesses? I personally think they have lacked a clear vision over the past few years but have reshaped it and resold that to investors for a valuation 2x from 2yrs ago.

P(startup) = c * P(pivot), for some constant c

People can argue what makes a company a startup or not initially, but I think this is the more important part, because it gives you the most useful fact about a startup: how you can tell when it stops being one.

If you're doing customer discovery, throwing MVPs out to see what sticks, and pivoting constantly, you're a startup. If you've found product-market fit, are making quality products, and are entrenching yourself into the market and eliminating competitors, you're a business.

Or, to paraphrase Eric Ries: a business is a predictable engine for repeatable revenue generation. The process of groping around in the dark trying to create such an engine, is a startup.

Is Apple a startup then, having pivoted from computers, to music players, to phones?

Hopefully c <= 1 :-)

The definition of a startup (from PG?) sums up to a company that favours growth over profitability. For instance, a company like Square that keeps raising money to accelerate instead of taking profits.

But that definition would include Amazon. I don't think a company founded in 1994 and went public in 1997 can be considered a startup.

well, you could argue that the startup business plan is to become profitable through outside investment rather its own business model. square fits this, their target group is still a single customer with a large sum of money rather than lots of customers with small amounts (aka a business).

losing money as an intermediary on financial transactions is not easy. banks and organised crime sure scratch their head looking at square.

It's actually a term for businesses that are designed to grow fast and still experience a high growth rate:

http://www.paulgraham.com/growth.html

That's Paul Graham's definition. There are lots of others, which is one reason people get confused when arguing the topic.

You could use other definitions, such as picking an arbitrary number of years and call anything younger than that a startup. But maintaining a high growth explains so many aspects of a startup's life (why founders give up parts of their company to investors, why most are focused in technology etc) that it seems any other way of looking at it would be misleading at best. Why would a 6-month restaurant be called a startup if it's not designed ever to scale beyond its neighborhood, or why would you no longer call a startup something that keeps growing weekly at 5%?

>> If you want to understand startups, understand growth. Growth drives everything in this world. Growth is why startups usually work on technology—because ideas for fast growing companies are so rare that the best way to find new ones is to discover those recently made viable by change, and technology is the best source of rapid change. Growth is why it's a rational choice economically for so many founders to try starting a startup: growth makes the successful companies so valuable that the expected value is high even though the risk is too. Growth is why VCs want to invest in startups: not just because the returns are high but also because generating returns from capital gains is easier to manage than generating returns from dividends. Growth explains why the most successful startups take VC money even if they don't need to: it lets them choose their growth rate. And growth explains why successful startups almost invariably get acquisition offers. To acquirers a fast-growing company is not merely valuable but dangerous too. <<

No matter how many paragraphs one quotes from Paul Graham, it is very hard for an argument to evade the reality that the word "startup" was used in other ways before he wrote this essay.

It's common for people to have discovered a new concept intuitively without understanding all its implications. Like Newtonian physics. Aiming to redefine it properly is worthy.

Almost entirely unlike Newtonian physics

I have had this brilliant idea of a start-up. A website that has one big button saying start-up, and it costs $1 to press, and voila you have your own start-up. So...who's in?

Nonono that's not how it works. First you register a hip-sounding .io domain name, fill it with some random blurbs of cool text in a Bootstrap layout, and post it on HN as 'Foobar.io; X + Y for Z', where X/Y/Z are random keywords taken from a list (x and y being other cool successful (former) startups).

Then you pivot half a dozen times whilst getting investor money, which you whisk away to your private accounts in tax havens, then after 1-3 years you get acqui-hired by Google, Facebook, or Twitter.

That sounds familiar, except for the private accounts part. Has it ever really happened that an investor-funded startup was embezzling money in private accounts? I've never heard of that happening, it would be a major scandal if it had, wouldn't it?

It is trivially easy. It is also illegal.

Take any service or product needed, from office space to hosting to headhunter. Have a middle-man provide that service, and provide a kick-back / incentive / referrer fee to the person choosing the service or product needed.

Again, it is illegal, possibly fraud possibly other, and certainly not unique to startups. Things like competitive bidding attempt to mitigate this risk, as do knowledgeable advisors to investors. And many other methods.

If somewhat foolish as one's personal reputation could be dashed in an instant, a VC/PE firm managing other people's money may not like having their own gullibility publicized in equal measure, leading to an under-the-carpet affair, or something else.

It's not impossible, it can definitely be done through asset acquisition at higher prices, or contracting some dubious consulting agents/firm.

but but....:(

If you have enough employees to need a full time HR person, you're not a startup anymore.