How long is a startup a startup? Jason 21 Aug 2006

66 comments Latest by John Doe

We’re grateful for the press we’re getting. However, there’s one thing that makes us cringe: Many people still tag us a startup.

We’ve been in business since 1999. Basecamp, the product we’re best known for now, was released back in February 2004. Early 2004 was before AJAX, “Web 2.0,” and even Ruby on Rails (we didn’t put that out until the end of July that year). We’ve since released four other products and written a book.

We’ve seen the same thing with Flickr (Ludicorp), Six Apart, Threadless (which has been around since 2001, and, according to Wired, is expecting $20,000,000 in revenues this year), and other established players. Is this just poetic license or is the line really that blurry?

What does it take for a startup to leave the startupsphere?

66 comments so far (Jump to latest)

Dave Astels 22 Aug 06

My rule of thumb would be the point at which it becomes self-sustaining… profitable, with any VC’s having recouped their investment & return.

Joe Ruby 22 Aug 06

> What does it take for a startup to leave the startupsphere?

I. P. O.

Nate 22 Aug 06

Have you actually seen it hurt you in anyways to still be labeled a startup? This isn’t meant as a retort at all I’m just curious.

There’s probably a ton of “established” companies that would die to still be labeled a startup. I mean, isn’t that what Google still tries to accomplish? Make it still feel like a startup? Seems like you guys have accomplished that in spades. So much though that people make this mistake.

You might miss it one day.

Gideon 22 Aug 06

I think that a startup ends being a startup when it becomes a boring hierarchical bureaucracy: When ‘saving face’ becomes more important then ‘being real’.

John 22 Aug 06

I tend to agree with Dave — that profitability and self-sustainance are pretty key.

I guess the only problem with this is time — if you build something with a small team, and your costs are minimal, and you make your invested money back in a short period of time (say a few months) — can you shrug your “startup” tag that quickly? Probably not.

It’s likely more a function of longish-term performance, reliability, profitability and repayment of any investment/borrowings.

Tom 22 Aug 06

Irregardless is a company has taken angel/VC money, a “start-up” is no longer a start-up when revenues exceed your expenses.

Now note, the company could still be in debt even if revenues exceed expenses - but then again, many people argue having debt is a good thing b/c it allows you to do more.

Diego 22 Aug 06

# Startup company, a recently formed company

If you ask me, yes, you still are a startup, 6 years it is not enought time for a company (even in the web). That’s my opinion.

John 22 Aug 06

Tom - how on earth can one argue that having debt “allows you to do more?”. This = bizarro-world logic to me, but please prove me wrong!

Also — Joe Ruby, I really hope you were joking ;)

HasMany 22 Aug 06

> What does it take for a startup to leave the startupsphere?

Buy Google.

Ray Morgan 22 Aug 06

John - I think Tom means that debt forces you to do more, or the debt will kill you.

Joe - I.P.O. is not the only out, many companies stay private, and love it.. this should not be the classification.

I think that a startup these days is way too much a loose term, a term freely tagged to anyone thats not a Google or Apple. I would definantly not call 37signals a startup due to its many products and profits, even after hiring how many more people since 1999?

Tom Mornini 22 Aug 06

Tom (not me!) meant that some see debt as good because it’s leveraging your income. I don’t believe Tom was saying *he* thought it was good, but that others do, and he’s right.

Some investors and analysts view debt free companies as not aggressive enough. Apple Computer, for instance, has $9B in near-cash, but many (not me!) believe they should leverage that cash and invest in their future via debt financing.

It *is* somewhat bizarro world, but it’s true. :-)

John 22 Aug 06

Ray and Tom (the second one!) — thanks! Still seems like a pretty backwards way of moving forwards, but I’ll do some more research ;)

Also, Tom (the second!), Engine Yard sounds awesome. Going to need something like this very soon.

Ed Byrne 22 Aug 06

Startup, insanely, connotes a company with a small number of employees … I bet if 37S had 50 or 500 employees it wouldn’t be called a startup anymore.

Joe Ruby 22 Aug 06

I was half-joking. ;) Maybe it’s different now after the bubble, but I think people think a company is small-time (i.e. still a startup) until they get it together enough to IPO. Sure they may be profitable, made money for VC’s, etc., but why haven’t they IPO’d?

And I hope 37Signals NEVER IPO’s! That’s usually a sign when suckage will begin.

bleh 22 Aug 06

you still have the hungry, smart attitude and leanness of a startup.

the trade press likes to assume that getting big, fast, is the goal of every business and so a company with 7-9 employees must certainly wish to be one with 7000-9000. so until you look at business as war and talk about “killing Google” or something, i guess you’ll still be looked upon as a startup?

Jesper R�nn-Jensen ( 22 Aug 06

> We�ve since released four other products and written a book.

Huh? What happened to the other book? As far as I’m concerned, you’ve written both “Defensive Design for the Web” and “Getting Real”.

As a side note, I think “Defensive Design” really is a must-read for people working professionally with web. It deserves more than being hidden behind your new book!

Gabor 22 Aug 06

Is it a bad thing to be labelled a startup? I doubt it.

I agree with the previous commenters that being a startup is an attitude thing.

Also, it’s not like 37signals has become a large company (largeness being one characteristic of not being a startup), at least measured in headcount.

Xavier 22 Aug 06

John (and others) - Interest on a loan is an expense, so you write it off against your income to pay less tax. I’m not going to go into the math here (it’s been a while since I did it and I’d get it wrong), but you can generally get a better return on investment with $50K capital/ $50K loan than $100K capital even when paying interest on the loan, since your investment in the first instance is half of the latter (and leaves you another $50K to have some fun with…).

Neil Wilson 22 Aug 06

Obvious really. You are a startup until you sell out to the suits and dump your principles.

I like being a startup

Phil 22 Aug 06

I think a startup is a company where everyone does a little bit of everything.

If you begin to hire dedicated server admins, full-time secretaries, your own lawyers, you are leaving the startupsphere. This does not have to have to be a bad thing, just make sure you hold onto what the company was founded on�


Daniel 22 Aug 06

A startup: A tech-based (especially internet-based) business that does not pre-date (at least in the mind of the journalist) the dot-com crash.

These criteria may also apply:
1) The company doesn’t seem or simply isn’t huge (i.e. no mentions of thousands of employees and the Companyplex in Mountain View, CA)
2) An older company is itself clinging to the startup-title because it conveys “innovation” and other buzz-words
3) Employees have a low average age (20-somthings to early 30’s)

In the case of 37signals, I think that it’s the “age in the mind of the journalist”-factor. If the journalist hadn’t heard about the company before recently, then the company itself is recent. Also, during the dot-com goldrush, the companies that got sudden and massive media attention really were startups, and now many journalists think that media attention simply equals startup; a tech-company suddenly getting a lot of press must be a startup.

Igwe 22 Aug 06

Well you went from web design to application development. I think with that move your company was reborn and has once again become a startup.

Joe Ruby 22 Aug 06

When DHH is no longer saying FU and shove it, that’s when you’ll know 37 Signals is no longer a startup! ;P

David Lewis 22 Aug 06

Sticks and stones…

Mark 22 Aug 06

It’s a label — don’t worry about it.

As Daniel points out above, it probably has to do with the “age in the mind of the journalist” factor. Not only that, I think it indicates your age in the mind of the mainstream (non-techie / web) public. I’d take it as a positive that you’re gaining traction out there.

Embrace the contraints of the label. Be and act like a startup, even though you might not be. Corporations and the small departments / teams within them who are trying to do something innovative embrace the “startup” label — you should too.

It only hampers access when you let it.

Long Time Listener - Repeat Caller 22 Aug 06

“according to Wired”

Isn’t that one of those new-fangled startup technology magazines. I give them another 3 months, tops. ^___^

Daniel 22 Aug 06

Like Mark just said, and what I forgot to add to my previous comment, is correct: Don’t worry about it.
I can understand if it’s a little frustrating to be considered/described as “this young lil’ company” when you are in fact pretty well established. But startup is, in my view, a mostly positive label that reflects well on your products, making them interesting right away. “A well-established company that’s been around for years have released a new web-app” doesn’t nearly as exciting. Startup is nimble, agile and has vision (sorry for the marketing-speak).
Still, startup is a slightly loaded word, what with all the startups that don’t make it, but seeing as 37signals has already made it, I’d advice you to simply ignore the negative meanings of the label and, as Mark said, embrace the positive interpretations.

Rob Mason 22 Aug 06

According to Wikipedia: A startup company is a company recently formed, usually until IPO or acquisition.


Ben Walther 22 Aug 06

Few, if any, binders.
Some binders, mostly financial + legal details.
Many binders, including documentation and other things people are supposed to know but don’t.
Majority of knowledge held in binders. Actual employee knowledge equivalent to random noise.

Mark 22 Aug 06

1 year of profit pretty much says to me that it’s established itself.

Ryan Heneise 22 Aug 06

> You might miss it one day.

I imagine it must be a bit like having a youthful face, and constantly getting asked for ID when buying wine. It might be bothersome, but youth is attractive, is it not? Let people underestimate you, and you’ll always have an advantage over them.

jonezy 22 Aug 06

did i read that right. threadless is expecting 20,000,000 (that’s million right) in revenue this year?!?

Tom (the first one) 22 Aug 06

Related to the people confused about why debt can be a good thing, use this as an example.

How many of you live in a house? How many of you like the house you live in? Now, unless you had a few extra hundred thousand lying around in your bank account - none of you would be living in that house unless you took out debt (mortage) in order to live in that house.

Debt can be good. It allows one to do much more than without taking out debt.

Without having debt, most of us would never have a car, home or go to college b/c you didn’t have the entire cash on-hand to be able to buy those things.

This same idea applies to business in what they can do when they take on debt.

Jason should understand this concept very well since I believe he was a finance major at university (and, since he took Bezos money).

Also, 37signals is NOT a start-up anymore. Actually, from the sound of it - they haven’t been a start-up for a number of years now.

scott brooks 22 Aug 06

It is funny how people have to classify stuff. I was a a large industry party and it seemed like everyone was a startup ….on guy that i was talking about he was telling me he was a start up….interesting ….told me what he did …ok interesting …..told me that the company was 2 weeks old ……

When does a startup become a start up?

Is 3 guys getting together a strt up …or is a startup a start up when they have an idea ……

I look at our project and i think that we reached start up when we formed the corp, setup bank account, etc …..not when we first sat down in the coffee shop….

Keep the start up mind frame ……



Jamie Stephens 22 Aug 06

I agree with Mark and Daniel and would add that a lot of it seems to be related to appearance and attitude. I imagine that if you stopped maintaining this blog (or changed the content to be only product/company related), stopped being transparent in general, used heavier colors on your site and products, and hid your individuality more behind the veil of corporatism, then you might shake the label of startup a little bit sooner.

To me the problem seems to be the lack of an adequate label for companies that are serious about sustaining hard, innovative work but also serious about being real with their customers and true to themselves. Perhaps it is because this type of idealism/enthusiasm is more typically seen in companies in the early “startup” days and not as much when the company is in the “warfare” of maintaining their mature product.

In my opinion, in the absence of a good label that communicates that you are a different kind of company than the typical small company out there (if indeed you want to distinguish yourself in such a way), then I would agree with those who suggest embracing being called a startup. At least it communicates a certain, usually positive, image that helps people remember you as a group that is (probably) doing something different. I can’t think of any better label that would do that.

Is there any single label that you would really be completely happy with?

Narendra 22 Aug 06

With Webshots, the company had been around for 9 years and driving close to 15M in revenue and we still felt the pressure of that moniker.

Some people seem to equate it with youth, attitude, and the tech industry.

Josh Williams 22 Aug 06

Sadly, I think the stigma from the business press is that you’re a startup until either a) you IPO or b) you’re acquired. Unfortunately, this is a very one-sided way of viewing things.

Personally, I think of a startup as a company that is still working to become profitable. If a company has turned a profit for a few consecutive years, it certainly has achieved something that most classified as startups have not.

On the flipside, having the label “startup” isn’t the worst thing. In some ways, at least you sound like you’re still innovating. It’s a shame all companies didn’t have a bit more startup in them.

Steve Pilon 22 Aug 06

I think that often, especially in the case of the companies you listed, people use the term “startup” when they really mean “upstart” — in the sense that these are companies who buck the system, approach their chosen business sectors in new and novel ways, and suddenly the world is noticing that they are having an impact and are really shaking things up.

BTW — I’m expecting $20,000,000 in revenue this year too! Of course, I’m also expecting that revenues might not meet expectations.

Daniel 22 Aug 06

I completely agree with Jamie Stephens’ “appearance and attitude” reasons for why 37signals is labelled a startup, and that there should be a better word for it.
How about “ninja”? Efficient, inventive, and you’ll never know what hit you. Or “guerilla”? Not in the counter-establishment or warfare sense, but in that 37signals is effective in using different means and “tactics” than the ususal tech-company means and tactics.
Or, how about simply “Less conventionalism”?

Dan Boland 22 Aug 06

I think what happens a lot of the time is that the people reporting on companies such as yours see a short list of employees and make the assumption that because you’re so small, you must be starting out. In their eyes, no company starts out big and no established company stays small.

Remaining Anonymous 22 Aug 06

I concur with the “appearance and attitude” point 110%. I work for a company that’s technically a startup, because we’re still a good distance away from being profitable, but the management team knee-jerks in the corporate direction — the inverse of 37signals. Dress codes, enforced work hours, plenty of corporate make-work in the form of functional requirements and project paperwork that has no bearing on the finished product or really any grounding in reality. Nobody calls us a startup.

Dave Simon 22 Aug 06

Even though 37s has been in business since 1999, people will consider you a “startup” because you didn’t enter their consciousness until now.

There are still some people who think Google is “new.”

Andres 22 Aug 06

I think the word “startup” is shifting in meaning. I think more and more it refers to an attitude and business model than a life stage. Seems to me that the first web boom characterized the startup company as a dynamic, lean, small and progressive company (and many irresponsible and financially innept as well). These qualities seem to carry more weight these days in the word “startup”, than the financial status of the company.

Perhaps this is where your uneasyness with the word comes in? With being associated with that breed of companies that busted in the first boom/bust?

Andrew 22 Aug 06

It seems that a Web 2.0 org will be described as a startup until it folds, is acquired, or IPOs.
Exceptions? Six Apart?

RJB 22 Aug 06

Maybe its more of a state of mind. If you can keep the startup mentality, what ever that means to you, then you will always be a startup.

In any event, being at the early stage is better than being at the ending stage.

SH 22 Aug 06

Wow, all these opinionated comments and no one has told Tom that “irregardless” isn’t a proper word? I expected more from this crowd.

Stafford Kendall 22 Aug 06

When you start wearing a suit and tie to lunch… then you’re no longer a start up.

Scott 22 Aug 06

I think it’s the press that makes that decision. As long as the company fits the buzz de jure in some way and is a relatively new comer to their ears, a company qualifies as a “Startup”. Keeping a company tagged with Startup holds peoples attention in much the same way NASCAR races do. Nothing beats seeing a car crash into a wall at 190mph.

Tom Markiewicz 22 Aug 06

Why does being labeled a startup even bother you? Your customers will never care about that label. I’d wear it with a badge of pride. When small business is still considered 600 employees by the SBA, I think we have a long way before these labels mean much of anything.

tiger 22 Aug 06

Visto is 10 years old and has raised > $200MM and people still call it a startup… :)

JF 22 Aug 06

I�d like to point out that Threadless is owned by Skinnycorp. But $20,000,000? Where did that figure come from?

I used Threadless because most people wouldn’t recognize SkinnyCorp.

The $20MM is from Wired magazine last month. The number came from the folks at Skinny.

Bernie Aho 22 Aug 06

I think the public’s perception maybe that you are not out of start-up until you have one of those big 20 floor buildings with mirrored glass and a giant logo on it.

Maybe once u have a lawsuit filed against you or something.

beto 22 Aug 06

I knew you guys back when you were, like, just four of you. And I specially recall how JF took quite unabashed pride on pointing that out to everyone that asked. Are things changing on the 37s front?

The trouble you guys have (and as some others have pointed out) is that you are trying to fight the popular concept of an startup. If your staff still can be counted with the fingers on both hands, you just can’t help being called like that. The image of a non-startup company as something housed in a swanky building filled with hundreds of employees is hard to wipe away from the public conscious, no matter how many millions of dollars you guys can keep raking in by yourselves.

And coming to think of it, few, if any, companies get to hit such profit levels and stay small. So why worry…

JF 22 Aug 06

Are things changing on the 37s front?

Such as?

I’ve never liked the term startup except when we actually started the company in 1999. 7 years later I cringe when I see the startup label applied.

I guess it’s like the band everyone thinks was an overnight success but has actually been plugging away for years in empty clubs.

And as I mentioned in the post, it’s not just us. It’s companies like Six Apart, SkillyCorp (Threadless), etc. These aren’t startups either.

That’s all.

Steve R 22 Aug 06

You are still labeled as a startup because you smell like one:

- Jeans -n- tees
- Open-source tools, some of which you geeked out on and actually created
- Punk attitude (e.g., telling a room full of people who make their living espousing ‘big software’ that their lifes’ work is ‘bulls**t’)
- founders still actively and vocally involved in business
- no PR flacks, ‘mission statements’, or other corporate bric-a-brac

Wear suits, speak from a script, or better, through a PR firm, and hire an assistant to hold your briefcase and take notes for you, join the Union Club of Chicago and the Rotary and you might be on your way to being ‘established’.

Until then, enjoy the advantage of being underestimated by the ‘establishment’. Others’ stupidity is a great weapon.

optimus 22 Aug 06

I really like Jeffry Timmons’ definition of entrepreneurship, which owes a bit to Schumpeter. He describes entrepreneurs as those who relentlessly chase opportunities without regard to current resources in hand. In other words, doing a lot with a little. That’s the essence of the startup to me, and it’s why certain long-standing companies remain startupy years after other firms become ‘established’.

Don’t know about Flickr, but with you guys, it’s your ongoing (calculated) risktaking, fast-moving combat against large and entrenched competitiors, the redefinition of existing markets through technical and business-process innvocations… I think that makes you startupy even if you get old.

optimus 22 Aug 06

In relation to my last comment: I suppose I’m using ‘startup’ and ‘entrepreneurial firm’ interchangably. But still.

Thinking a bit more, I think that innovation is really the more important factor — but that in the popular imagination, what matters is the scale of one’s competitors. If you were a machine shop or tool-and-die outfit and had $20 mil in revenues and a few dozen employees, you’d be Big. If you are a software shop and create products that compete with Microsoft, you’re Small.

And smallness (again, in the popular imagination) has a lot to do with startupyness.

Mike Doan 22 Aug 06

In the accounting profession there is a technical definition for development stage companies (or “start-ups”). Basically, you are a development stage company if you have not started your planned principal operations or if you’ve started your planned principal operations but have no significant revenues.

By the way, there are plenty of start-up companies that are publically traded companies, so wikipedia’s definition is questionable.

Bruno 22 Aug 06

If i’m making $20.000.000 a year i wouldn’t mind how people call me!

FredS 23 Aug 06

Jesus, 20 mill? No wonder they’re moving to a new space.

John Doe 25 Aug 06

37signals isn’t a “giant” yet, and there’s nothing else between these two words, I guess. ;-)

John Doe 25 Aug 06

37signals isn’t a “giant” yet, and there’s nothing else between these two words, I guess. ;-)