Startup means many things: The successors of a family business establish a "startup" to develop new products. The "food startup" on the corner sells the latest Instagram creations. Corporations advertise their "startup culture" in job postings.
The term startup promises exciting new products, a friendly working atmosphere, speed, and flexibility. The Munich sociologist Armin Nassehi once said:
“Startup means that you […] belong to a new social class, namely the creatives, that is, to those who, by their very nature, actually reject what they are doing, namely developing a business model.”
So, are startup founders entrepreneurs disguised as creatives? In the narrower sense, "startup" means something else and very specific. For example, the coronavirus aid for startups is aimed only at a very specific type of company. When we talk about the "startup nation Israel," we don't mean the countless fantastic fusion restaurants in Tel Aviv, but primarily the many young software and high-tech companies in the country. And Munich Startup also primarily reports on startups in a very specific sense.
Startup or start-up?
First, the term: The Duden dictionary only uses the spelling "Start-up." However, in recent years, "Startup" has become more common. "Start-up" presumably emphasizes its origin from the English "to start up." Even in English, however, "startup (company)" is more often read than "start-up (company)," for example, in the corresponding Wikipedia article.
A search in the Google Books Ngram Viewer shows how often “startup” and “start-up” appear in German-language books was used. In 2006, "startup" overtook "start-up" for the first time. From 2013 to 2015, "start-up" briefly held the lead, but then finally lost the lead.
These 5 points distinguish a startup from other companies:
1. Forever Young
First of all, the most obvious thing: startups have something youthful about them. It's not just the stereotype that startup founders wear hoodies instead of suits and look more 30 than 50 years old. Startup icon Elon Musk also presents himself as a youthful person. smokes weed during an interview, sells and plays with Flamethrowers and argues on Twitter with half the worldThe 49-year-old sometimes seems like a mixture of college student, Bond villain and rock star, but certainly not like a middle-aged man.
2. Lean and Agile
In the past, the path from a (business) customer's request to the finished product was relatively clear: On the customer side, there is a need for a product or service. The customer writes down what they need in the specifications and looks for a service provider who can deliver the desired product as cost-effectively as possible.
But there are a few problems with this: During the development process, requirements can change, and the finished product is no longer needed. Or the customer may not even know exactly what solutions are available. Or, after years of development, it turns out that the budget is completely insufficient and development will take much longer than planned. Or, or, or...
Startups have a number of methods and working practices to address these difficulties in the development process, which distinguish them from other types of companies. First, there is the 'Lean Startup' model. The goal of this principle is to streamline company processes as much as possible and focus all actions on the actual goal: the development of a product for which there is a market. Instead of complex considerations and tests, hypotheses are tested on the market as quickly and cheaply as possible. The team builds a functioning prototype, the MVP or Minimum Viable Product, with minimal effort. This prototype is revised in the shortest possible cycles and repeatedly tested on customers. If it turns out that a product does not find a sufficient market, there is no sentimentality; instead, the product is modified, resold, or discontinued – the main thing is not to waste any more resources. Fail fast.
Agile working follows a similar path: product development is placed at the center of a dynamic process. In short iteration loops, the team constantly reflects on its own work. There are also some other differences to traditional product development: The agile method Scrum, for example, rejects hierarchies in the development process. Instead, developers work on equal footing with a product owner who represents the customer's wishes and a Scrum Master who ensures adherence to the process. The two agile experts Christian Kroemer and Tobias Hingerl recently in an interview with Munich Startup more about agile working and Scrum.
3. Exchange instead of backroom dealings
Startups value openness, collaboration, and exchange, both internally and externally. Startup founders are accustomed to talking incessantly about their company and their products: during pitches to investors, at startup competitions, and at networking events. While traditional founders hone their products or even fear a competitor might steal their idea, startup founders seek constant exchange because they know: The idea is nothing, the execution is everything. It's better to take advantage of good contacts and public visibility with potential employees and customers than to hide in the back room. Even the heads of unicorn companies like Flixbus and Celonis – when events were still possible before the coronavirus pandemic – could be found on the stages of small and large events.
4. Change as a permanent state
While traditional companies generally struggle with transformation and change management, startups have made constant change their principle. It's a common practice in the lean startup model to jettison non-performing products or to pivot—a radical change in the business model. Even former startups that have grown into giants are constantly transforming: Zalando, like Amazon before it, is evolving from a seller to a platform provider, and Google is only marginally operating the world's most successful search engine. The way young companies like Tesla have pushed industry giants ahead of them in recent years shows how effectively and flexibly startups can handle change, while traditional companies cannot.
5. Growth instead of profit
From representatives of the Old Economy You often hear the accusation that startups just burn other people's money and don't create any value. And this accusation is often true: startup companies don't want to make any money in the early stages, but rather grow as quickly as possible. Since startup founders know that ideas are worth little and only execution counts (see point 3), you have to be faster and better than the others. This is especially true for business models that rely on the network effect: here the benefit of a product increases with the number of users. This applies, for example, to social networks, marketplace portals and many more. Whoever gets big first takes the whole pie, or to put it another way: you shouldn't start a new Airbnb, eBay classifieds or Facebook now.
Behind the growth priority lies a cultural shift: For the "honorable merchants" of the past, an impeccable reputation counted. The founder pays his debts, manages his business soundly, and doesn't overextend himself. The startup founder, on the other hand, raises money from investors who factor in the potential for total loss. Whatever one's moral opinion of this, a look at the most successful companies of the past decades shows that this model is overwhelmingly successful.
