A startup isn’t like a regular company. Actually, we should probably start by asking if a startup is even a company in the first place.
A startup can be defined in many different ways – Eric Ries defines it as “a human institution designed to deliver a new product or service under conditions of extreme uncertainty” while Slush alumni Katariina Helaniemi, Annaleena Kuronen and Venla Väkeväinen define startups as: “a young company that is still searching for their business model and is aiming for high growth. Startups are usually creating a new type of service or product, aimed at solving a problem.”
One definition of startup we find useful is as follows:
Startup: a group of experiments to find a solution to a problem and create a sustainable and scalable business model around it.
A startup isn’t a normal company because its primarily goal is to find a business model through trial and error. A startup is a group of trials, through which a company is born – or isn’t.
This makes the risk profile of a startup high. It’s not worth becoming a startup entrepreneur unless you’re willing to dedicate a lot of time to it and take risks.
Why do we need startups?
Startups are perhaps the most interesting form of company because they offer a unique opportunity for global influence and growth – an opportunity that many people could only dream about a few decades ago.
However, startup culture creates mixed opinions. It seems like people are either ecstatic about startups or can’t stand them. Startups are often a target for unfounded arguments. The hype around them is easy to perceive as wishful thinking or even lies. This has resulted in many wrong assumptions regarding startups.
Part of the issue may come from the fact that startups thrive on hope. Startup entrepreneurs create stories about how the future could look and try to make these visions come true. They have a strong belief that they can have an influence on the world and that their actions have consequences that can make the world a better place. In the startup world, a business that’s still in the idea phase can potentially have a remarkable impact in the next five years – maybe even with a turnover of a billion dollars. This hope is often perceived as hype, and it’s a fair point. There is a lot of unnecessary hype around startups. For those who have worked a long time in the startup scene, they’re often just annoyed about the hype because they are doing what they do because they want to affect what the future looks like.
The difference between hope and wishful thinking
Startup culture is about shaping the future, not just passively accepting what’s coming. This is the main difference between wishful thinking and hope: a true belief in what you are doing. The future isn’t something that you wait for. It’s something we all create with our actions, choices and decisions.
For example, artificial intelligence (AI) has lately begun to change the world in unforeseen ways. When the fear of AI was at its highest, many people in Europe feared that AI would “take over”, while the startup entrepreneurs in Silicon Valley had an entirely different attitude summed up as follows: “Why should we fear the AI future? We’re the ones creating it and deciding how it’s done.”
Failure is OK
Because hope is the most important factor in startups, this can also lead to failure. This is one of the fundamentals of startup thinking. As startups take great risks, there will also be misses. But by learning from them, startups can create the kind of value that no other kind of organization can.
That’s why startup culture highlights the importance of failure as an opportunity to learn. Startups in their best form are machines for learning very quickly and trying to find solutions for problems. The pace at which startups can learn is something that is very hard to achieve in any other setting.
Why startups matter
This leads to the one single most important answer to the question “Why we need startups?”. For us, the answer is simple: startups are one of the best ways to solve problems and implement solutions rapidly on a global scale. Whether it’s a huge global problem like climate change, inequality between different countries or something more casual like cheaper transportation options or better payment solutions, in many cases startups are the best organizations for solving problems.
There are many examples of how startups can shift the business landscape. For example, none of the traditional car manufacturers started a major shift towards electric cars before Tesla. None of the existing food producers really started the movement towards alternative protein sources until Beyond Meat, Impossible Foods and many others entered the scene.
Critics could point out the problems the companies above suffer from. While it’s true that many of these companies and their products have issues, they still are in many ways acting like startups – learning rapidly, iterating and trying to find solutions for significant problems – which means failure is part of the process. And they are doing this faster and with better success than any other organizations at the moment – while also trying to solve important problems.
Startup entrepreneurs help to keep the society moving forward, while more traditional organizations are typically focused on maximizing existing value. Society needs both startups and traditional organizations.