Let’s ditch the term “startups”

Can we please get rid of the term “startup business”?

What separates a startup from a regular new business (lets say a corner shop). Development of a new service? Maybe – but surely a corner shop needs development too, like kitting out the store front. How about market research? I’m guessing that most people who set up corner shops check to see if theres any customers first.

An obvious point which us techies seems to forget in startups is that business is about making money. Making a profit is a skill – one which most coders don’t have. In its simplest form, this skill boils down to generating income that exceeds your costs. In a more detailed form it means investigating if theres a market for your product, solving an existing problem, generating interest in your product, marketing, keeping your customers happy, balancing costs – the list could go on for a while.

As developers we can have plenty of experience in developing scalable applications and developing intuitive UI interfaces but making profit? Nope. Marketing? No way. I guess the problem is that we live in the false assumption that if our product is good enough then it will sell itself.

I intended this post to be for investors and that a golden rule they should have before investing in someone is that they have been instrumental in a profit generating business (I guess that rules out pretty much everyone at Groupon). I do not mean someone who has worked for a profitable business but someone who was involved very directly with generating cash whether it by sales or marketing – I think startups solely comprised of developers are doomed to failure.

That said, there are developers out there who possess a business and technical mind but they just lack a little experience in the former. Incubation programmes such as the NDRC’s Launchpad Programme are excellent at nurturing people’s business acumen.

I’d venture to say that the lad selling burgers on Stephen’s Green on a Friday night has a better knowledge of business than about 70% of people out there running startups. So that’s why I want to ditch the term. By just adding the label of “startup” to a business it seems to create this misconception that its okay for it to go months and months without beginning to generate revenue, or indeed years and years without generating profit.¬†How long do you think our imaginary corner shop would last without profit? A year, maximum?

My experience in the past few month’s working on my new X Factor app has taught me the importance (and complexities) of marketing, audience targeting and cost control. The fantastic thing about the app marketplace is that it allows us developers to get experience with the fundamental elements of business without having to invest a lot of cash. Any developers who want a break from the technical side of things and who want to be a bit more involved in business aspects should definitely try launching their own app.

Labeling new businesses as startups really doesn’t do us any favours because of the connotations it creates. Henry Ford once said that a business that makes nothing but money is a bad business but, as I see it, a business that doesn’t make any isn’t one.

2 Comments Let’s ditch the term “startups”

  1. Peter Wang

    No, we should not get rid of the term “startup”. It applies to any business that is innovation-driven and whose primary risks are *market* risk and not execution risk. It follows, then, that their primary act is the process of customer discovery and exploring for viable markets where an idea or a technology can have the most long-term impact.

    There are many, many other traditional business models or phases of a business’s life cycle that are not focused on customer development. For technology companies, these are perceived in a negative light, simply because innovation is always possible in a technology organization, assuming they have retained good staff. However, for a huge swath of traditional businesses, cost-cutting and revenue optimization and jockeying for position in an established market are all very important strategies for growth, and that are not startup-like activities at all.

    There are a large number of great books on startups and entrepreneurship that talk about the key features that distinguish a startup from a traditional business, and how to build a good one: Four Steps to the Epiphany, Innovator’s Dilemma, etc.

    All real startups are businesses; not all businesses are startups. Ergo, it is a useful term. Just because a lot of folks in the SV bubble think of startups as VC-funded “programmer finishing school” doesn’t mean that there’s not a real semantic distinction justifying the term.

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  2. James

    You have hit the nail on the head with this article. Startups are not born in a day just like Rome !

    Reply

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