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Are Top US Startups Really Startups? (om.co)

Posted by msmash on from the what's-in-a-name dept.

Veteran technology reporter and columnist Om Malik writes: Pitchbook, a data research company has come up with a list of top 14 most valuable startups in the United States. There are no real surprises -- they are all ranked by valuation and they all are valued at north of $4 billion. They are all household names -- barring Outcome Health and Samumed. And they have been around forever. They have thousands of employees and many have billions in revenue. What they are not is liquid on public markets. They have not IPO'd. In a different Silicon Valley, they will all be public companies and they won't be deemed startups. Revenue, growth, relative size, market share -- pick a metric (except for lack of profits in many cases) and you know they aren't really startups. So can we stop calling them startups -- and instead maybe call them VC-backed private companies -- otherwise the label startup loses its meaning.

38 of 57 comments (clear)

  1. Is Business Model Validated? by ranton · · Score: 1

    I am not sure what the official definition is, but I would say a company is a startup until its business model is fully validated. As soon as they have hit scale, and are growing without half of their budget going into marketing, then they are just a company. Not being profitable isn't much of a problem if the primary reason they aren't profitable is because of increased investing in their product (aka Amazon).

    Also, I find it hard to call any company which has went through a large IPO a startup. Sounds a lot like a standard company at that point to me.

    --
    -- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
    1. Re:Is Business Model Validated? by ShanghaiBill · · Score: 1

      Plenty of companies never IPO, so using that as a criteria is silly. Some companies that were public, later privatize again. Did Dell become a "startup" again when it privatized in 2013?

    2. Re:Is Business Model Validated? by Darinbob · · Score: 1

      I was at a privately held company once. They made a ton of money and they sold product at a premium to the biggest name companies. They did NOT want to go public. Eventually they did because the primary owners wanted a piece of that pie and this was just before the time of the dotcom boom. Going public meant money to expand. At the time though the word "pre-IPO" was used more than "startup".

      After going public there were the inevitable hiccups. More rules have to be followed, procedures put in place, things written down, things kept secret until reported publicly, etc. Then the focus sort of want away from profitability towards expansion and increased stock valuation, which worked for awhile until it all collapsed (a few months before dotcom bust, they always were a trendsetter).

    3. Re:Is Business Model Validated? by datavirtue · · Score: 1

      Profit is profit. The reason for profit is to reinvest into the business.

      --
      I object to power without constructive purpose. --Spock
  2. What's an IPO got to do with it? by mcmonkey · · Score: 2, Insightful

    There are many large private companies that could in no way be considered start-ups.

    Is Mars (the candy people) considered a start-up? Bechtel? LEGO?

    PitchBook doesn't seem to state their criteria for a "startup" (and I looked), but it seems whatever measure they use is off.

  3. Re:Taking bids by Nidi62 · · Score: 2, Funny

    My 15 year old "startup" isn't publicly traded and definitely doesn't make a profit.

    Offers above $4 Billion please

    Only if it leverages a blockchain to enable an IoT device to sync to the cloud, thereby allowing you to monetize big data utilizing a crowdsourced, "self-employed"(gig) workforce.

    --
    The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
  4. They are not startups by jasonma84 · · Score: 1

    In order for a company to be deemed a startup they should 1.) Be employed solely by the developers contributing to the startup and any free outside help they are able to recruit. 2.) Be based out of a garage or home dwelling. 3.) Be self funded, no third party funding (Venture Capital) and not generate more in revenue than their overhead. Majority of the unicorn startup boards are a joke. When you have in excess of a billion dollars in funding you are not a startup.

    1. Re:They are not startups by Big+Hairy+Ian · · Score: 1

      No they are not startups but that's how they started :)

      --

      Build a Man a Fire, and He'll Be Warm for a Day. Set a Man on Fire, and He'll Be Warm for the Rest of His Life.

  5. Wrong! by Anonymous Coward · · Score: 1

    Public companies are the bane of society. They create inflation and devalue the humans working for them. No companies should be public, or rather not have a valuation that exceeds the assets and 2 previous years of profits. As it stands now, high frequency trading and other type of speculants can increase the valuation of the company for no good reason whatsoever. Private companies are much less of an assholes to deal with as well.

  6. I thought "startup" always meant.... by mark-t · · Score: 1

    ... any VC backed company that has not yet achieved a positive ROI.

    --
    File under 'M' for 'Manic ranting'
    1. Re:I thought "startup" always meant.... by ShanghaiBill · · Score: 1

      ... any VC backed company that has not yet achieved a positive ROI.

      The majority of tech startups never seek VC funding.

    2. Re:I thought "startup" always meant.... by mark-t · · Score: 1

      You are what you do, not whatever your title happens to be. If you've funded a startup, then by definition you are its VC, even if you would not otherwise be considered a VC.

      --
      File under 'M' for 'Manic ranting'
    3. Re:I thought "startup" always meant.... by ShanghaiBill · · Score: 1

      I see. So according to you:

      1. A "startup" is a company funded by a "VC".
      2. A "VC" is someone that funds a "startup".

      That is tautologically vacuous, but certainly consistent!

      Which came first, the startup or the VC?

    4. Re:I thought "startup" always meant.... by mark-t · · Score: 1

      True enough.... I was overly specific when I said a startup would be VC-funded. Self-funded startups are, of course, still startups, even though they are not VC funded.

      It's my understanding that what makes a person a VC is when they fund somebody else's endeavor.

      --
      File under 'M' for 'Manic ranting'
    5. Re:I thought "startup" always meant.... by ShanghaiBill · · Score: 1

      Do you think that happened with ANY of the listed companies?

      The billion $ corporations listed in TFA are not typical startups.

      Uber was funded entirely out of the founders' pockets?

      Of course not. But thousands of other startups were.

    6. Re:I thought "startup" always meant.... by JohnFen · · Score: 1

      If you've funded a startup, then by definition you are its VC, even if you would not otherwise be considered a VC.

      Only if you are the "money man". If you are funding your own startup, you are not a VC.

      And, really, even if you are the "money man", I would say that you aren't a VC unless your purpose in investing is as a business activity (as opposed to, say, funding your child's startup because you're doing them a favor).

    7. Re:I thought "startup" always meant.... by JohnFen · · Score: 1

      It's my understanding that what makes a person a VC is when they fund somebody else's endeavor.

      More accurately, it depends on the means by which you expect to recoup your investment. If you're giving a loan or gift, that is not being a VC.

      A VC, by definition, is taking an equity position: that is, they expect to get their money back through a share in profits rather than a fixed (or no) repayment schedule. That's why some startups seek them -- VCs invest in businesses that are too risky for traditional lenders to touch.

    8. Re:I thought "startup" always meant.... by JohnFen · · Score: 1

      BS.

      You might not believe it, but it's true -- and by a very wide margin. The most recent estimates are that about 0.3% of startups use VC money.

      Most startups never seek VC money (for really good reasons -- VC money is very expensive, and you don't want to touch it unless you're desperate.)

    9. Re:I thought "startup" always meant.... by JohnFen · · Score: 1

      I looked at old data for that 0.3% figure. The percentage has risen since then, and as of last year the estimates are 1 - 3%, depending on who is estimating. Also, entrepreneurs have caught on to the problems with VC money and the number of startups seeking or accepting it is declining.

    10. Re:I thought "startup" always meant.... by mark-t · · Score: 1

      .....they expect to get their money back through a share in profits rather than a fixed (or no) repayment schedule

      Ah... well, I learned something today.. I thought a VC would be anyone who expected to get their money back.

      --
      File under 'M' for 'Manic ranting'
  7. Re:Taking bids by courteaudotbiz · · Score: 3, Informative

    You forgot the hashtags to make sure your overhyped keywords are well publicized

    Only if it leverages a #blockchain to enable an #IoT device to sync to the #cloud, thereby allowing you to #monetize #bigdata utilizing a #crowdsourced, "self-employed"(#gig) workforce.

    FTFY

    Now I am the one getting rich! XD

  8. Proper link to the top 14 list by Walking+The+Walk · · Score: 5, Informative

    Pitchbook, a data research company has come up with a list of top 14 most valuable startups in the United States[om.co].

    Here is a link to the actual list by Pitchbook, rather than linking to the reporter's own article on the subject. msmash, it would probably be good to update the summary to use that url for the first link, since that's where people will expect it to go.

    --
    A recursive sig
    Can impart wisdom and truth
    Call proc signature()
  9. Kinda like "All Natural" by swan5566 · · Score: 1

    There's no legal requirements associated to the label - it's just a marketing gimmick. Maybe it's true to the connotation, maybe it isn't. As soon as it stops suiting their needs, they'll change it.

    --
    In debates about Christianity, there are two groups: those looking for answers, and those looking to just ask questions.
    1. Re:Kinda like "All Natural" by CanHasDIY · · Score: 1

      Also, "Small Business"

      Legally, the term is defined by number of employees.

      Legally, Goldman Sachs (the wealthiest investment bank on the planet) is a 'small business.'

      --
      An enigma, wrapped in a riddle, shrouded in bacon and cheese
  10. Household names? by H3lldr0p · · Score: 1

    I don't think that means what you think it does.

    None of those are companies I've ever heard of. So maybe they're well known in certain, small circles but I wouldn't call them "household" names. Or brands. Or whatever they're doing since it seems their products are nothing more than sinkholes for good cash following bad.

    1. Re:Household names? by WrongMonkey · · Score: 1

      You've never heard of Uber, Lyft, AirBnB, Dropbox, or SpaceX? Is this your first time on the internet since 2003?

  11. Done! by Digital+Mage · · Score: 1

    We'll all stop calling them startups, whats next on the to-do list...ah yes, world peace.

  12. Startup = recently started by XXongo · · Score: 1

    "pick a metric (except for lack of profits in many cases) and you know they aren't really startups. "

    The metric I would pick is "recently started." Because that's the definition of startup.

    The start up dates in the list range from 2002 (SpaceX) to 2012 (Lyft). So they range from 5 to 15 years old.

    15 years might be pushing it, but all but 3 of the companies on the list were started less than 10 years ago, so by my count yes, they'd be called startups

  13. It's just a buzzword by JohnFen · · Score: 1

    Much like "small business". Seriously, look at specific companies named when talking about "small businesses". More often than not, they're not small -- they're just not megacorps.

    1. Re:It's just a buzzword by ShanghaiBill · · Score: 1

      Much like "small business". Seriously, look at specific companies named when talking about "small businesses".

      Everyone knows that small businesses are good, and big corporations are evil. So there is a lot of political pressure to redefine smallness so that bigger companies can be "good".

      Companies with 1500 employees can get taxpayer subsidized "small business" loans.

  14. Eatons by doconnor · · Score: 1

    The T. Eaton Company Limited was founded in 1869, became Canada's dominate retailer in the early 20th century, but has its IPO in 1998 as it was declining into bankruptcy.

  15. Startup == focused on growth by steveha · · Score: 2

    I work for a company that is making a ton of money and serving a lot of customers and has been around for years, but it still considers itself a startup. I wondered about this.

    The CFO explained it in an internal meeting: his definition is that a startup is a company that is still focused on growth above all else. And it's true, the company I work for is plowing a lot of revenue into expansion opportunities, going for growth rather than profits.

    When a company has a stable position in its market and starts focusing on making lots of money and/or paying out good dividends on its stock, at that point it is definitely no longer a startup.

    I don't know how universal this definition of "startup" is but it makes sense to me, and it nicely handles some of the corner cases discussed in the previous threads here today.

    --
    lf(1): it's like ls(1) but sorts filenames by extension, tersely
    1. Re:Startup == focused on growth by Macfox · · Score: 1

      Your CFO is redefining "Startup". Purposeful Reinvestment doesn't justify Startup status. If that were the case Amazon would still be "Startup" 10+ years according to your CFO.

      The concept is pretty well established.

      Put simply if the business isn't relying on seed or other capital investment for operations and expansion then you can't call it a "startup". Put it another way, if revenue is sustaining operations and expansion, it's not a startup. Once you hit that benchmark you are a regular enterprise from that point on.

      --
      Area51 - We are watching...
    2. Re:Startup == focused on growth by steveha · · Score: 1

      Put simply if the business isn't relying on seed or other capital investment for operations and expansion then you can't call it a "startup".

      Really. So the company I work for, which was profitable from its first week of existence and bootstrapped itself up, was not a startup? Even when it was four guys working out of one of the guy's house?

      Four years later, the company took some VC cash to fund some more expansion. Did it then magically become a startup after not having been one before?

      I don't like your definition of a "startup". I'll stick with the CFO's definition.

      P.S. One thing we can all agree on: the key attribute of a startup is its ability to grow. As Graham explains, a startup is a company designed to scale very quickly.

      --
      lf(1): it's like ls(1) but sorts filenames by extension, tersely
    3. Re:Startup == focused on growth by Macfox · · Score: 1

      That's a great story but not the typical scenario that this article is focused on.

      All startups promise to be profitable. Delivering an "actual" profit/return is a point of maturity, where the business is self sustainable. Subsequent capital raising
        past this point, doesn't magically make it a startup again. That's a ridiculous claim.

      --
      Area51 - We are watching...
    4. Re:Startup == focused on growth by LordWabbit2 · · Score: 1

      Well, by your definition Apple is a startup.

      --
      There are three kinds of falsehood: the first is a 'fib,' the second is a downright lie, and the third is statistics.
  16. Re:Taking bids by Darinbob · · Score: 1

    Now I am the one getting rich! XD

    Are you hiring? No need for salary, I'll just take the options as long as you have Doritos in the breakroom and I can sleep in my car.

  17. Re:Taking bids by courteaudotbiz · · Score: 1

    Sorry, I am not hiring. Just taking the money and run.