What is a startup?

Definition of a startup

A new business with the goal of scaling up is often referred to as a startup.

There is no official definition for what constitutes a startup in terms of a company's size, revenues and profits or the types of products or services it offers. However, two common traits are:

  • the age of the business (a startup is always in its early stages)
  • expected growth (startups generally intend to grow into a large business and scale rapidly)

Startups are commonly thought to have less stability and more risk than other types of businesses, as they often aim to solve a problem where the solution isn’t obvious and success isn't guaranteed.

Startups aren’t always small businesses; they can be any size.

AngelList has a public database of over 4.7 million startups from across the world but this isn’t an exhaustive list as it doesn’t include every startup and new companies continue to be added. Some of the most famous startups are those that reach “unicorn status”.

Frequently Asked Questions

What’s the difference between a small business and a startup?

One of the most significant differences is that a startup has the intention of scaling rapidly, while in most cases a small business will intend to remain small.

When does a company stop being a startup?

There is no definitive age or stage when a business loses their startup status, but it’s commonly accepted that this occurs when a company is stable, starts to scale and the business model is proven to work.

How can I raise money for my startup?

As with starting any new business, there are options for raising funds outside of personal investment and business loans. Venture capital, for example, is a type of private equity that is invested in new and growing businesses and is one of the most desirable funding sources for startups. Crowdfunding is also a popular option.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

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