What Kind of Start-up Are You?
Scalable, buyable, or lifestyle – knowing who you are makes success more likely
PHOTO CREDIT: Getty Images
If you had to choose, would you rather: A) sell your company to an industry giant for a gigantic sum, B) take in fresh funding from investors to further grow your business, or C) run it at your own pace, being content that you love your work and you earn a reasonable living?
Choosing “A” isn’t automatic – or even allowed to many entrepreneurs. That is because the answer depends on a start-up’s identity and mission at birth.
To begin with, not all start-ups are alike. They are distinct from each other through purpose, strategy and funding. Moreover, those distinctions are often clear from day one. Knowing what type you are, and what you want to be, will make future decisions easier to handle. Here are three popular kinds, adapted from Steve Blank’s list of six major types of startups.
The scalable startup
If you have your sights set on becoming the next Google, Twitter, or Facebook, then chances are you fall under this category.
Scalable startups are built for colossal growth. These require significant risk capital as they search for a scalable business model, after which more capital is needed to execute rapid growth. Because it is capital-intensive, funding is typically secured through the traditional venture-capital route.
The Kang sisters, creators of dating app Coffee Meets Bagel, clearly have the kind of large-scale vision that fuels scalable start-ups. Early this year, the three women stunned everyone when they turned down Shark Tank host Mark Cuban’s offer to buy the company for $30 million, saying they believe their start-up has what it takes to become a billion-dollar enterprise like established dating website Match.com. So far, the Kangs have raised about $11.2 M in external funding, according to Crunchbase.
The buyable start-up
Build and sell – such is the likely fate of buyable enterprises. Think Twitter’s acquisition of video app Vine and live-streaming app Periscope in 2013 before these were even officially launched. Buyable start-ups are companies that focus not so much on scalability but grow just enough that they attract larger companies, who then acquire them for their product and/or talent.
Blank points out that the rise of buyable start-ups can be credited to a confluence of factors: drop in production costs, availability of crowd- and angel-funding sources, and reduced time to bring a product to market. Founders generally choose to raise capital through crowd or angel funding, which means there is less pressure to achieve scalability goals than if they had been backed by venture capital.
The lifestyle start-up
Turns out, you can eat your cake and still have it, too. Lifestyle start-ups are ventures built around the founder’s lifestyle and which, in turn, enable said founders to live the life they want.
Avid surfers who establish surf schools and fashion designers who launch their own brands fall under this group. So do the founders of Hacker Paradise. Casey Rosengren and Alexey Komissarouk organize co-working retreats around the world for fellow location-independent workers such as developers, entrepreneurs, designers, writers, and other creative types. The trips open up opportunities for collaboration and allow freelancers to help each other stay motivated – possibly while sipping a piña colada poolside in sunny Bali.
BY Thomas Koulopoulos