Last editedDec 20212 min read
Having been long associated with young creatives brimming with ideas, being referred to as a startup has a certain appeal. But at its core, a startup is simply a company in the initial stages of business. This means that at a certain point, a startup can no longer be correctly referred to as such — no matter how trendy it is. In this post, we’ll take you through various indicators that a startup is in fact no longer a startup.
When is a company no longer a startup?
The following metrics will give you a good idea of when a startup is no longer a startup.
Achieving product-market fit
As startups are in the initial stages of business, they will be researching the market and designing a product or service they hope will fit the market, be desirable to customers and go on to sell well. Once this has already been achieved and a product or service is no longer in the prototype stage but is actually being brought by customers, then this is a clear marker for when you are no longer a startup.
Scale of the company
If we consider the definition of a startup as an enterprise in the early, fledgling stages of business, it goes without saying that the scale of the company must be modest - even if they have huge ambitions. If the scale of your business is sizable, it’s a clear sign that you can no longer be defined as a startup.
Scale is determined using indicators such as revenue, number of employees and the age of a business. There is no definitive figure for any of these elements which will tell you are no longer a startup, but it should be fairly clear once your scale has surpassed that of a startup.
Alex Wilhelm of Techcrunch created the 50-100-500 rule which states you can no longer be defined as a startup if you have a revenue which exceeds $50 million, have 100 or more employees and have a value of $500 million or more.
Company Profitability
Another metric which can determine whether or not a company is still eligible for startup status is that of profitability. This doesn’t just refer to revenue minus expenses, but also refers to efficiency and investment returns. It can therefore be narrowed down to net income. When this becomes a significant figure, it’s probably time to lose the startup label.
Bureaucratization
Another clear indication that it’s time to renounce the startup title is when the business begins to become more bureaucratic. This means that you are now using official and formal channels of communication and have standardized and efficiently organized your processes and operating procedures.
In practice, this may mean you now have a dedicated accounts team, an appointed marketing and branding team and are no longer working with just a small group of individuals focused on ideation. Instead, things are running like a well-oiled machine, and you are not experimenting with organization.
In other words, creative experimentation and innovation are perhaps still part of the business process but have taken a back seat to standardized, organized bureaucracy.
When a startup is no longer a startup
Taking the above criteria as indicators, you can determine whether or not your business still qualifies as a startup or not. However, since the term startup has somewhat exceeded its initial definition and may now refer to a mentality and style of business, it is perhaps possible to retain the label of startup in relation to your business, even if it is not an accurate or exhaustive definition of your company.
When you are no longer a startup, you can begin to refer to your company as an SME, or small-to-medium-sized business. Although naturally, this term has less trendy, positive associations attached.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.
