Startup vs. Company

Startups are easy. Companies are hard.

This article was published on March 23, 2011.
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Wesley Verhoeve and I got into an hour-long debate at SXSW with two guys from San Francisco about the meaning of the word "startup." Their position was confusing. They tried to claim that they were currently working on a half dozen startups (what I'd term "projects"; a startup needs focused development), and as the dispute developed they also insisted that Facebook and Twitter were still startups and not companies. "You can't use the term for everything," I said, "just because it's an online product." Maybe it's a New York vs. San Francisco thing, but in New York we're building companies, not startups. Maybe it's because it costs more to live here, but we're trying to put food on the table, not be on the cover of Business Week.

Startup vs. Company

Startups are Easy

Anyone with an idea can create a startup. I see this from email, my mentorship programs at Tech@NYU and TechStars, people I follow on Twitter, running into people at SXSW, and just around town at different NY tech events. I worked with two friends this past month to help them launch their startup — all in all about forty hours of work.

Startups are easy to conceive and launch, and oftentimes they attract a few hundred or a thousand users. Everyone's friends and families are on the Internet. We have large networks of friends on Facebook, LinkedIn, and Twitter. Friends are often supportive and won't think twice about trying out your startup. Getting them to stick around and invite their friends, well, that's another matter, and fuel for another article.

Not only is it easy to get your startup off the ground, it's also the cool thing to do these days, so we've got a hell of a lot of them. We Internet geeks are being profiled as "cool" in the mainstream press, girls are more interested in us than Wall St. people or lawyers (at least in New York), and our friends in normal jobs are jealous of our lifestyle. What happened to the days when I got made fun of for being on a computer all day?

These social intangibles are all contributing to more and more people creating startups. Not companies, though, that's too boring. That's too much like the day job we just quit. Let's just hack away on cool side projects, grab a bunch of funding, and see what happens. Umm… what can come from that, exactly?

Companies are Not Easy

My co-founders and I did not start Carbonmade to be cool, get girls, or make our friends jealous. Instead, our long-term vision for Carbonmade was to build a company. We wouldn't be pushing ahead in this way if we didn't have a commitment to steadily increase the size of our paychecks — and our employees' paychecks — as we grow.

What makes creating a company so difficult is that it's no longer a couple of people sitting around their apartment fine-tuning an idea. Those were the days! It's a team, all working together to solve a complex problem. Then if you're lucky enough to solve it, you have to sell, market, and support it. It starts to get scary.

Building a business is mind numbing when you think about it. You have to be a little insane to venture down this path. Your chances of succeeding are slim, and even if you do succeed you have to continue to innovate or you'll be obsolete in eighteen months.

I'm not writing this to crush the hopes and dreams of people looking to start companies, but a dose of reality never hurt anyone. Your startup will eventually need to make the jump into company land and then, damn, things do get tough. If you're not ready to face that reality from the beginning, it may be too daunting when the time comes.

Startup No Longer Means Startup

The word startup has taken on a new meaning. It once meant an early stage enterprise in the research and planning phases, but now it has come to be defined as the way one builds a company online. Even companies that have been around for five years, generate millions in revenue, and have fifty employees are continuing to use this word to describe themselves.

Well, I want the word "startup" back! You build a startup to test an idea and then you build a company to execute that idea. Let's get back to that distinction. No more romanticizing about how cool it is to be an entrepreneur. It's a struggle to save your company's life — and your own skin — every day of the week. When this bubble blows up — and it will — only the people who have been prepared all along to make a business out of their startup will survive.

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