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Recent Blog

Who Cares What a Startup is? You Should.

BY Brant Cooper / Brant's Rant, San Diego, Startup Community / 0 COMMENTS

Note: This San Diego Startup Week_Alternate_logoarticle first appeared in Xconomy during San Diego Startup Week.

According to the Oxford English Dictionary, perhaps better known these days as Oxforddictionaries.com, a startup is defined as “a newly established business.”

To purists, perhaps, this might be true. But language evolves, and definitions change. One reason language evolves is because nuances come to light that need to be reconciled. Because language is a model overlaid on reality, the ultimate truth is not in the language, but in what the language is trying to represent. These days, the startup community is changing the dictionary-based definition of a startup.

From the experts, for example:

Steve Blank: A startup is an organization formed to search for a repeatable and scalable business model.

Eric Ries: A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.

Paul Graham:  A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth.

Mark Suster offers a more nuanced view, believing an overemphasis on growth hurts some startups. Some business models simply take longer to grow than others, yet still fit in the startup category. Some are even, perhaps, destined to make a “dent in a smaller world.” (I might put it as a smaller dent in the same world.) The fact remains that even in Mark’s qualified view, a startup is not the same as a “small business.”

As startup financing evolves, my belief is that Mark will be proven correct. Venture capitalists will only finance a small fraction of companies that seek to be worth billions, and the rest will finance growth through investment capital not dependent on the black swan “big win.” In the end, the distinction of what makes a startup is not what level of growth one aspires to, but rather, whether one truly, in the heart of hearts, has ambitions for growth at all.

A restaurant on Main Street that wishes to expand their business across the West is more similar to a new military uniform manufacturer seeking scale through global defense contracts than it is to a nearby PR agency, drycleaner, or a family-owned electronics repair shop on the same block.

The financing, mentoring, legal advice, real-estate needs and so on, are fundamentally different for fast-growth companies than traditional small businesses. So are the requirements for success. For the former to achieve their ambitions, the founders must hire a team, including sales and marketing, delegate authority, hire experts, outsource parts of their businesses, seek partnerships, and so on. Profits (if there are any) go back into the business. The small business founders (this is not a criticism) typically maintain tight reins on their businesses both in terms of hiring and engaging outside influences. The owner seeks profits as soon as possible, and is not concerned with putting the profits back into the business.

It's All Fun and Games Until Someone Loses an Eye

The point is that fluffy articles that have great fun pondering the question, “what is a startup?” are completely ignorant of the implications. So let’s see if we can set this straight. All of the above definitions would agree that though startups start small, “small businesses” are not the same thing as startups. The definition of a startup has less to do with how long you’ve been in business than with the scale of business you attempt to achieve.

Equally contentious is the question of when a startup ceases being a startup. Again, it isn’t defined directly by how long it’s been in business. Dropbox has been in business for seven years. It’s received about $1 billion in funding (including debt financing). It needs to get a lot bigger to provide a return to its investors. It’s still a startup.

While there’s a lot of gray area, there are three ways to define the end of a startup: 1) Through an equity event, such as acquisition or IPO. The investors get their money back, maybe more. 2) The market has spoken, and the company in its current state will not continue to grow. It has essentially morphed into a small or medium-sized “lifestyle” business. No equity event is on the horizon. 3) The company folds.

Startup entrepreneurs seek to disrupt markets or at least bring significant change to the status quo. A startup ceases being a startup when that has been achieved, the market has limited the potential size, or the founder has given up seeking that, due to any number of factors.

Small business owners might object to the notion, but most small business owners prefer to stay small. Fast growth causes problems that most small business owners do not want to deal with. Why? Because they can have a satisfying lifestyle without stressful growth. Sane people wish for nothing more. You are happy when you align your objectives with your lifestyle. BOOM!

The broader implications are immense. Only recently did some federal and state officials recognize the difference between startups aiming to be big companies, and small businesses founded by people who are simply trying to provide for their family.

The latter is nothing to sneeze at; Small businesses are the backbone of the American economy. In my opinion, we should do whatever we can to support the efforts of entrepreneurs seeking to improve their lives by starting their own businesses. That is at least half of the American Dream.

What Businesses Create More Businesses?

But small businesses do not create scalable businesses. On the other hand, scalable businesses create small businesses. When TakeLessons, a local scalable startup, grows from 10 employees to 100 in two years, it requires larger and better office space, and spends more for office supplies, accounting, legal fees, and so on.

Scalable startups are important because they increase demand for other products and services. Their growth induces other businesses to grow. Even large businesses cannot impact local businesses in this way. They increase or decrease demands on the local economy on the margin. New growth companies create new demand for legal, accounting, office supplies, design, architecture, food, drink and so on.

“Small Business” is not a pejorative term. Neither is “lifestyle business.” These are incredibly important to the San Diego economy. But the resources required for small business and scalable businesses are vastly different. The City of San Diego, as well as civic organizations, the media, and others need to recognize the difference to align and move with the changes we hope to bring about by fostering a startup culture in San Diego.

Startups are not small versions of big companies or big versions of small businesses. So there are all sorts of things we need to do differently.

Through the Downtown San Diego Partnership and the San Diego Regional Economic Development Corp., San Diego’s city government has made great strides in supporting the local startup scene, without perhaps, overtly recognizing the fundamental policy differences required by its varied constituencies. Nevertheless, the City of San Diego should consciously recognize the differences between small business and startups. Recommendations:

—Evaluate current programs through the startup lens. Are they designed for startups or small businesses?

—Engage with startup founders to determine if they might benefit from modifications to existing programs.

—If it is determined startups can be assisted, market to them as startups, not small businesses. City services will not successfully recruit startup founders by referring to them as small businesses.

—Brainstorm new programs, including zoning, tax incentives, and real estate spaces that might attract startups, which would create a demand for retail and other small businesses.

Governments, especially local ones, must understand the difference between small businesses and scalable startups, if they intend to support economic growth.

Branding is for Old-School, Madison Avenue, Creative-Guru, Marketing Geniuses

BY Brant Cooper / Brant's Rant, Lean Entrepreneur / 2 COMMENTS

the lean brandNon-ROI-measurable marketing sucks.

Non-ROI-measureable marketing practices are a throwback to pre-Internet days, when advertising and branding were built upon a house of cards. Creative geniuses in their black turtlenecks mucking about in their black boxes creating "BRANDs" that turned commodities into classics, high school dropouts into gazillionaires, lemons into lemon Meringue.

But they still exist. The House of Cards still exists. Why? Because it takes a long time to disrupt stuff. The house of cards WILL fall. When customer behavior is measured, advertising dollars WILL be spent on those practices that deliver return. Period.

The traditional concept of branding is the last throwback.

Where do you see yourself in five years?

What's your mission-vision-culture statement?

If you were an animal, what would you be?

If you were a dog, what breed would you be?

If you were an amplifier, how loud could you go?

Pulse check: the World has Changed.

While branding has always been about "relationships", the engagement rules, the ethos, was communicated in one direction (message) and replied to asynchronously (buy/don't buy). As Patrick Vlaskovits might say, the medium was the message. The content was (perhaps subconsciously) heavily influenced if not determined by the medium (TV, radio, newspaper), not the product per se.

That particular relationship doesn't really exist anymore, other than with perhaps, internet technology laggards.

Disruption strikes like a Boa, but digestion takes a long time.

As if you couldn't guess where I'm going with this, the relationship between "brands" and customers has changed dramatically as the channel has changed from one-direction to multi-directional.  It is both synchronous and asynchronous, it is both real-time and time-lagged, it is one-to-one, one-to-many, many-to-one, and many-to-many.

Where's your creative genius to figure all that out?

Branding MUST be redefined to encompass the new reality. Brand loyalty is not simply based on logos, tag lines, and consistent messaging.  Brandaneers will say "it never was" and then ask you the questions above to help you produce a color palette. It's always been about relationships, they'll say, as they bid to manage your social media stream and proceed to spew one-way "relationship" drivel.

Consumers are powerful and power-hungry. You will be crushed as quickly as you will be venerated. You'll get the peak of the TechCrunch Bump, but just as quickly, the despair of the TechCrunch pit of "well that sucks, none of the those clicks were give a shit about my product."

So what is a "brand" exactly? And how are you going to evolve your thinking about the purposeful exercise of "branding"?

These are the questions that Jeremiah Gardner and I attempt to answer in The Entrepreneur's Guide to The Lean Brand."

For startups, purposeful branding requires a deliberate effort to establish an ongoing relationship with customers based upon providing value. The brand must represent the achievalble promise that your business makes to its audience, plus the shared aspiration you have with your customer to achieve change.

This is actually pretty heady stuff. And yes, if you're producing a "take-a-pill-and-be-wonderful" product, this isn't for you. But we can fit any business into this model, whether you're a startup, a small business, a life-style business, or a Fortune 1000 company that is committed to creating true value in society.

Are you one of those?

If so, join us on our journey to discovery how we create passionate customers through new branding, fit for this new age.

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