When is a startup no longer a startup? Or a better question, when should a startup stop calling itself a startup?
Diana Ransom explores these questions and gives insight into the positive and negative effects of calling your business a “startup” in the marketplace and with investors.
Written for Entrepreneur by Diana Ransom
Here’s a question for you: When did Facebook lose its startup status? I found myself befuddled by this question recently, and it led me to wonder when a business can no longer call itself a startup. Case in point: A 5-year-old company (which will go unnamed) I was profiling recently billed itself as a startup. I wondered: Is there any advantage to a company continuing to call itself a startup even though it has been around for a few years?
Perhaps there’s some cachet to the startup nomenclature, vs. the more generic “small business.” Or is it that the founders wish to maintain a startup state of mind, clinging to their early emphasis on running a lean, quick-moving outfit? Maybe it’s a dollars-and-cents issue: If a company isn’t yet reeling in revenue, can it really be called a sustainable business?
No matter the psychographic or financial reasons for failing to call a spade a spade, misrepresenting your company’s life stage could carry steep consequences. Among other things, you could be stunting your company’s growth. “If your real intention is to grow, you don’t want to stagnate by staying in that startup-phase mentality,” says Donald F. Kuratko, executive director of the Johnson Center for Entrepreneurship & Innovation at Indiana University’s Kelley School of Business.
It’s also poor form among financial backers to act like a perpetual startup. “Investors think, You don’t even know what you are,” Kuratko says. “They think, How can we invest in them if they can’t take their company to the next level?”
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