The definition of a startup

Eric Ries, the founder of the lean startup movement once defined a startup like this:

“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”

Whereas Paul Graham defines it like this in his famous post about growth:

“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. Everything else we associate with startups follows from growth.”

In his post he says a good growth rate for a startup is about 5-7% growth per week, which really is a tremendous amount. It might not seem much at first but think about it: If you have 100 users a day, a 5% growth rate per week means that you have 105 users after a week, 162 after 10 weeks, 1264 users after a year, 15984 after two years and 202083 after 3 years. This is exponential growth working for you. It’s no coincidence that startups need an average of 3-4 years before they get big and you hear about them.

It’s incredibly unlikely however, that you can hit such a growth rates easily. Airbnb, Dropbox, Twitch have seen these growth rates and not without reason: They solved important issues their users were facing. What these companies achieved is the so called product / market fit (PMF), without it it’s almost impossible to grow fast (most startups which think have achieved PMF and scale prematurely fail).

The gist is: if you build a product, and it doesn’t have exponential growth, it’s not a startup, it‘s a good product or a company at best (which isn’t bad either).