Monday, May 22, 2006

What is a startup?

Whenever anybody starts creating anything ,astounding as it may sound, they are quite likely to miss the first critical step "to define what they are creating". I remember woh basic design course main professor Saha told us about some 5 steps of design, first step was like: brainstorm & define your design or something of sorts. We were like aarghhhh give us a break. We obviously know what we are going to design, it’s a god damn wheel chair, whats there to think over it? Hmmmmm.......may be it was worth a thought, the wheel chair that we designed was supposed to climb down the stairs. It did, but only if nobody was sitting on it. :)

Its been about an year when we started our venture, I'm realizing that we started our start-up without even knowing what a start-up is rest aside what its gonna do. A lot of things have cleared out now. We are still not absolutely sure what exactly we gonna do five years from now, although the directions we are going and alternatives that we have are much clearer. One thing which has considerably cleared for me(or so do I think) is what actually can be termed as a start-up. I think in India idea of start-up is not that well understood, atleast it wasn't to me when I started. We tend to look at companies like google, hotmail, infosys, indiabulls, Bose, skype etc. but never really understand why they were startups when they started? I read a lot of articles by Paul Graham to have an idea of what actually is a start-up, i'll be quoting him alot in this Blog.

Here are few common characteristics of start-up that are sometime confused as definition of start-up:

1. Any new company is called a startup

A new travel agency or a consultancy can not be called a startup[In this blog all text in italics are direct quotes by Paul Graham]. Also new or old can not define a startup, theoretically a company can retain its status of a startup after 10 year of their operation, but usually startup can not sustain themselves that long so this is quite rare.

2. Any new company working on something unique is a start-up

Google was not working on anything unique, neither was infosys.

3. If a company is working on some fundoo product then its a startup.

Well actually thats what Paul Graham seems to think, but I feel thats due to U.S. atmosphere. In U.S. and other developed countries where manpower is not a resource it true but not in India. Infosys was very much a start-up when it started. So was E-value serve.

4. If a group of college friends or work-mates, quit their jobs and start a company then that's a startup

Working with college friends rather than essentially incompetent and useless people in my old office was a big motivation for me to start my venture. Sometime I thought thats the whole point. Well ...... you do require founding members of start up to work well as a team. This kind of team can be well formed in collages or in offices but is not necessary. Almost invariably lot of differences are bound to exist among the team member but they are generally ironed out in under the hot iron of starting a startup

5. If small group of people work in cool unprofessional atmosphere then that's a start-up

Working in cool atmosphere is a thing that improves productivity of its members. Well actually it doesn't but working in a conventional 'professional' atmosphere reduces productivity enormously. In a supposedly professional atmosphere a lot of time is wasted in looking busy and conveying to others that you are working, this time wastage can not be afforded my members of a startup so the startup offices are much casual and cool.

6. If a company is bought by some venture capitalist or some other big company than that's a startup.

It’s a rather good definition but it still doesn't clear out things. Infosys I dont think ever got an offer from some V.C. before loosing their startup status. It’s a good definition coz V.C's are smart people and they inherently know what startups are and why they are good investment options so they tend to buy them.

7. If a company is started with meager initial funding, then that's a start-up

Due to high mortality rate of startups and hence them being a high risk investment this breed of angel investor that mushroomed during dot.com era is almost extinct now. So startups have to start from whatever funds that their founders can somehow assimilate. Also a startup's chance of success is more or less inversely proportional to amount of initial funding, so it’s a good idea to start with minimum.




A startup I think is a company that is developing a solution that is useful for a lot of people. The other important characteristics of that solution is that it has the capability of scaling up practically infinitely.

Skype developed a product that can be used by million of users and obviously expansion does not require involvement of it founding members. Google developed a code for a search engine that is based on grid computing and it can accommodate infinite amount of data on net and still give results in .000021 secs. Core team of Google I feel can still be termed as a startup coz they are still developing many new such solutions which are useful for a lot of people and can be infinitely expanded. Narayan Murthy, Nilkeni and other members of the group developed a system that can provide IT services to clients and they made a system such that it can infinitely expand so it became infosys and they expanded infinitely.

I still don't know whether this is the correct way to put it, but it seems logical and it has helped me align the strategic growth of my company in a particular direction.
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