Today, every person tinkering in their garage now thinks they’re a “startup entrepreneur.” But are they?

Photo Credit: Shutterstock/ “Somehow they figured out how to monetize their brand.”

Is your business truly a “startup”? In a recent essay on LinkedIn Today on the common myths in marketing today, I wrote the following:

“Startup” is nothing more than the newest buzzword for “small business.” Decades ago, a person with a business idea would borrow a little money or take some savings, write a business plan, and ask the local bank for a loan. Today, the exact same thing is true – except that the first and third steps may be replaced by angel investors or venture-capital funds.

Starting to understand

Here, I wanted to address this issue further and invite further discussion because a lot of the marketing and VC worlds are interested mainly in startups (whatever they may be). When I first worked for startups in Israel in the early 2000s before opening my own marketing firm, the word “startup” referred to any high-tech company of up to 500 employees. In other words, it was any small, high-tech business. As the years went on, however, more and more companies wanted “in” on the designation because it was something “cool” to be. It’s cooler to be a startup founder that just another “small-business owner.” Today, however, every guy tinkering in his garage now thinks he’s a “startup entrepreneur.” But is he? Let’s look at some of the definitions of “startup” from various perspectives:

• The Merriam-Webster Dictionary: A fledgling business enterprise.
• The Cambridge Dictionary: A business that has just been started.
• The Oxford American English Dictionary: A newly established business.

With all due respect to the bibliophiles of the world, these three dictionary definitions just don’t cut it because they are too vague – the descriptions could refer to any new business. When marketers and investors say that they want to work with or invest instartups, they use that word – and not small businesses – because they have something specific in mind. (Even if they cannot articulate it exactly.)

• Investopedia: A company that is in the first stage of its operations. These companies are often initially bank rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small scale operations are not sustainable in the long term without additional funding from venture capitalists.

Investopedia’s definition is a little better – however, replace “… from venture capitalists” with “… from banks” and you’ve described every small business that has ever existed before the Internet.

• Warby Parker co-CEO Neil Blumenthal: A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed.

Parker’s definition is insightful because the best “startups” try to do something completely original and innovative – as well as risky. It might be a new website that aims to give the world an entirely-new way to communicate (Facebook and Twitter), a new way to map a destination and avoid traffic jams (Waze), or something else. Traditional small businesses such as restaurants are risky, but are not really doing anything very original.

• The top answer to a similar question on Quora (1,800 up-votes!): A ‘startup’ is a company that is confused about — what its product is, who its customers are, and how to make money. As soon as it figures out all three things, it ceases being a startup and becomes a real business. Except most times, that doesn’t happen.

The answer on Quora is great because it perfectly summarizes the chaotic lives of early-stage businesses that are trying to develop plans while having little knowledge of where they are headed. Regular companies usually have a clear idea of where they would like to go from the start. So, after fifteen years of working for, investing in, and now advising startup clients, what definition would I give? Chiefly, I would argue that a “startup” is:

• A small business that has a specific, defined product with a unique value proposition and some level of seed or initial funding.

Of course, nearly everyone has his or her own definition. So, I wanted to throw the discussion out to the readers with an example. The three alleged startups in this Globes article are offering home-cooked meals with various delivery and/or take-out options. So, would you say that these are traditional businesses or startups – and why? Do you think it even matters what we call them? I invite your thoughts below on this question and the definition of “startup” in general!