What is a Startup?

From the perspective of a company like Google or from a venture capitalist’s point of view, a startup is a company that was formed within the last 4 or 5 years and has grown to 20 – and sometimes as many as 100 or more employees. They are looking for “growth companies”.

As Steve Blank would define it, a startup isn’t really a small business. Instead it is a temporary organization looking to build a business model – hopefully before it runs out of money.

Investors like to distinguish between “growth companies” and “lifestyle companies”. They try to avoid investing in “lifestyle companies”, because they are nervous about having their capital “marooned” in a struggling business. In spite of this they typically miss the mark about 68% of the time according to one study.

So somewhat less than one percent of ‘startups’ that look for money from arm’s length investors really make the cut as “growth companies”. If you are considering starting your own business you should ignore what these investors are looking for and understand instead what your goals and risk profile are.

In British Columbia BC STATS publishes a study called ‘Small Business Profile‘. Every year the studies show that only around 5% of companies have more than 20 employees. In fact companies with 50 or more employees are considered large companies (in BC at least) – which might seem to turn conventional wisdom on it’s head.

Using BC STATS definition of “Small Business” I created this analysis using statistics for Canada as a whole (Source: Statistics Canada)

 

The statistics for Canada aren’t that different than those for BC. The only differences are in the relative contributions of small business, large business and the public sector to total employment.

In BC small business contributes more to total employment and the public sector is less important.

 

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