What Kind of Startup is your Company?
DOUG: We have introduced the concept of a scaleup now. How exactly is a scaleup different from a startup?
ROLAND: That is simple. A startup is a venture that is still looking for product-market-fit. A scaleup has already found product-market-fit and is looking for product-market-dominance.
DOUG: I’m confused, what about Lyft, Dropbox, AirBnB, Spotify? All these famous startups that have long “hit it” and are growing like crazy? Do you not call them startups?
ROLAND: No, I would call them scaleups. Lyft and Dropbox, at the time of writing, have not reached product-market-dominance. Spotify is close and AirBnB arguably has reached product-market-dominance, so I would call them incumbents by now.
DOUG: How does our definition differ from how other people use the word “startup”?
ROLAND: The classic Silicon Valley definition of a startup is: any venture-funded company pre-exit. Meaning that the company has not sold itself or launched an IPO. I find this definition not incorrect, but problematic in guiding founders.
First, it puts disparate development stages of a company into one “startup” bucket. Second, the pre-exit stage is much longer than it used to be. That compounds the first problem.
DOUG: What is the problem with putting disparate development stages of a company into one “startup” bucket?
ROLAND: Many founders infer from this a black-and-white thinking on how to manage companies. “The Startup Way” pre-exit and “the Traditional Way” post-exit.
DOUG: Why is that so problematic?
ROLAND: Because this confusion causes more founders and growth companies to fail.
There is a vast difference between:
leading a startup, pre product-market-fit
leading a scaleup, post product-market-fit.
One is a small team looking for a match between their product ideas and a market. The other is a large team racing towards dominance of their market with a proven product.
My point is that each stage has its own recipes for success. If founders are not conscious of how demands on them change with scale, they will fail. What worked for them in one stage will damage their results in the next stage.
DOUG: Can you give us an example?
ROLAND: The book–Scaling Silicon Valley Style is full of examples, of course! But I can highlight a common situation. Successful early startups have a stubborn hands-on founder. They delight early customers with detailed command of the customer experience.
In scaleups, founders who remain hands-on become bottlenecks. Their need to decide everything blocks the growth of the organization. This is a common cause for scaleup implosion.
Roland Siebelink regularly speaks and writes about leadership in fast-growing tech startups. You can find more of his insights, including free chapters of his book “Scaling Silicon Valley Style.”