When you look around the advertising ecosystem, the ad technology sector is packed with start-ups which are often heavily-backed by venture capitalists willing to make a bit that Company X will be the next Facebook or Google.
Yet, over the past few years, some ad tech startups have crossed a threshold and created real businesses that no longer need the support of venture capital and can sustain growth on their own.
We reached out to a selection of executives who have either been in startups, invested in startups and/or closely observed them - and we asked:
When is a startup no longer a startup?
Click below or scroll down for more:
- Mike Lazerow, CMO, Salesforce Marketing Cloud, Salesforce
- Nat Turner, CEO, Flatiron Health
- Gil Beyda, Founder and Managing Partner, Genacast
- Seth Levine, Managing Partner, Foundry Group
- Martin Kelly, Co-founder and CEO, Infectious Media
- Keith Pieper, CXO, Sequenti.al Media
- Marc Goldberg, SVP, Business Development, About.com
- David Shim, CEO, Placed
- Jerry Neumann, Neu Venture Capital
- Elizabeth Zalman, Co-Founder and CEO, MediaArmor
"There's no line in the sand, with 'startups' on one side and 'full-fledged businesses' on the other. Depending on the industry, goals, and founders, companies each have individual sets of metrics that indicate when the startup title is no longer appropriate. For some, these metrics include things like profitability, market share, and longevity. For others, it might be an acquisition offer from a company such as Google or Microsoft. At the end of the day, every startup begins as an idea in search of a business model, but its evolution from that point, and how it 'officially' became an established company, is a unique journey.
As an entrepreneur, I think that it some ways, the 'startup' feeling never completely goes away. For example, even after you’ve gotten your business off the ground, you can’t focus your attention on a new and different venture. It’s simply impossible to put adequate energy into both. You have to be as loyal to your company as you are to your spouse, growing with it, changing with it, and going down new paths to keep things fresh. For me, this constant evolution keeps that startup vigor alive and well."
- "A startup is no longer a startup when product/market fit has definitively been achieved, profitability or substantial revenue with a path to profitability has been obtained, and if any one person left the company would still survive and not get rocked by the departure."
"To understand when a start-up is no longer a start-up, it is important to first understand what a start-up is. The Merriam-Webster definition of a start-up is 1) the act or an instance of setting in operation or motion; and 2) a fledgling business enterprise. This definition is a good starting point but to know when a start-up is grown up, a more detailed definition is needed. There is no generally accepted definition of a start-up in the venture community, so I will propose one. A start-up has these primary characteristics: a handful of employees, less than a year old, less than $1M in funding, up to an alpha/beta product and little or no revenue. There is no hard line when a start-up grows out of that label, but as these attributes mature the company looks less and less like a start-up. For example, I would consider a company to have out grown the start-up title when they hit 20 employees, $10s of thousands of monthly revenue, 1.0 product in market and having raised a couple million in funding. There is no hard and fast rule but this feels to me like an early-stage company and less like a start-up."
"I'm from Boulder so I get to say things like this, but really being a 'startup' is more of a state of mind than a line in the sand around some business metric (number of employees, revenue, cash flow positive, etc.). You're a startup when you act like every sale is the difference between making payroll and not; when your customers are the entire reason you do what you do; when you wake up in the morning thinking about your business and go to sleep doing the same; when you embrace challenge and chaos as part of the normal work environment; when you feel like you're creating or redefining an industry; when you're forever optimistic about your potential."
Martin Kelly, Co-founder and CEO, Infectious Media
"I'm sure that there are some more quantitative ways to work out when you are no longer a startup but my first thought is a personal one. When I think you are no longer a startup is the moment when you realise that the company doesn't actually need you any more. You look round the team and there is so much stuff going on that is nothing to do with you, there's a momentum and a direction that is set by you but doesn't depend on you. That's when you need to become a leader rather than a founder and that's a whole new challenge."
- "A startup is like booting a computer: once it's loaded it's no longer in startup mode. Loading all those apps in startup mode is getting all those pieces in place for a startup company. And like any Windows machine, it takes time. I think you cross the line 'startup' line to 'established company' when you exit or create something sustainable…that can keep operating on its own without external help (financing)..after you’ve “figured it out”. In other words, once you can generate profits on your own over a period of time, well, you’re on your own. You don’t need outside financing to survive. You know your market, what they want, and how to deliver it. You’ve proven to everyone that you have value and it can be profitable. The big key here is 'over time.' SurveyMonkey is a great example: it's been around for years, generating profits, acquiring other companies and new financing, but it's never had an “exit”. The recent financing wasn’t because they needed cash, rather they needed to create a small payoff for vested stakeholders. I wouldn't call SurveyMonkey a startup. They are a cash cow with an appetite for meat."
Marc Goldberg, SVP, Business Development, About.com
"As the barrier to entry for online businesses has become lower ( and confirmed by the new Go Daddy commercial I saw during the Super Bowl), the industry find itself with a tremendous amount of companies calling themselves start-ups. The mistake we make as an industry is using the term 'start-up' for a longer period of time than is true. Initial business plans are theoretical, but once the funding is closed and the product is launched you are a real business. You are accountable to users, clients, partners, team members, and investors. You are no longer a start-up.
That does not mean that you shouldn't maintain the mindset of a start-up. As a start up, you have the opportunity to define a culture, a product, a tone and disrupt a market. That adaptive and adoptive culture should always be in your DNA no matter what the size/stage of your organization. Google, Facebook, and Twitter are no longer small companies, but they maintain that startup culture as best as they can and it keeps them at the front of their industry.
When is a startup no longer a start up?
When should a company not behave like a start up?
"Subjectively, I’ll stick with multiples of 10. If the company is older than 10 years, or has 100+ employees, or a valuation north of $100m, the company is no longer a startup."
- "A startup, in ad tech, is any company that has not yet become an ad network."
Elizabeth Zalman, Co-Founder and CEO, MediaArmor
- "Two words: cash flow. Monetization of the ultimate value proposition. The size of the company is not indicative of moving beyond the start-up phase. It’s a state of mind. It’s when the company is no longer an idea, no longer a PowerPoint, but when the end user (business, consumers, etc) will pay you for what you do. Again and again and again. There are no more test budgets or pilots; there are only clients. It’s like lining up at a top-notch NYC deli for delicious black-and-white cookies. People just want them. They sell themselves."
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