I was just at an event last night where we went around the room and introduced ourselves.
Many people talked about their “company.” It’s hard to tell if they were talking about the company they worked for, the piece of code they were working on, or the group of friends they worked with to raise a seed round.
Steve Blank gave the best definitions of a startup I’ve ever heard: A temporary organization designed to search for a repeatable and scalable business model.
It’s a project. Until there are paying customers, a formed corporation, and a need solved that’s scalable, it’s a project. Startups fail because they are experiments.
Of course, it depends on where you are in the process. Anyone can turn from XYZ into CEO overnight with a project. It’s easy to give yourself a title and to build a prototype. That’s the simple part.
A startup moves from the project phase into the company phase when there is revenue. Revenue comes from paying customers.
By now, Lean Startup has become a common term. Lean Startup takes the principles of Customer Development and Agile Development and combines them. It’s important to think of customers first—who will actually buy your product? It ‘s usually not who you think! After you figure that out, how quickly can you iterate on your development when you learn this? This is known as agile development, or SCRUM.
On the other hand, there is no need to start a company (or even incorporate) when all you have is a project. Unless there are some patents, trademarks, etc that are essential to the core of the product, then all you really need to do is experiment. That’s the beauty of a startup. It’s not failure if you are experimenting and documenting what you’re learning.
A startup project is fun, exciting, and experimental. A company deals with real revenues and expenses, customers and support issues. So if you want to build a company, it’s okay to begin with a startup. Just keep in mind that customers are your goal. With customers comes real business decisions. If you don’t want a company, keep building startups! It’s all about the learning.
In your experience, at what point does a startup become a company?