Again and again, people try to distinguish between two kinds of startups: growth and lifestyle. Broadly speaking, here’s how people categorize these startups:
Growth Startup
- Raises VC or angel capital
- Aggressive hockey-stick like growth
- Laser focused on an “exit-event” (acquisition, IPO, etc.)
- Focus on revenue (not profits) or other growth metrics
Lifestyle Startup
- Bootstrapped of Self-funded
- Slow growth or no growth at all
- No exit strategy per se as the business is part of founders’ lifestyles
- Focus on profits at all times (as they don’t have external capital)
With Visual Website Optimizer, many people have asked me to clarify whether it’s a growth business or a lifestyle business. I’m always baffled with this question because these two categories seem narrow and I don’t see my startup getting pigeon-holed into one of them. It is true that we haven’t yet raised any VC or angel funding. But does it really disqualify us from being a growth business? What if I tell you that our revenues (and profits) have been growing by 10-15% every month. We are actively hiring but we’re not in a rush to expand the team aggressively (sacrificing quality). We’re happy with the slow but quality growth in team and product features. Does it make us a lifestyle business?
Why should there be a difference at all?
Why can’t a business qualify both categories: lifestyle and growth? Growth businesses typically take years before an exit event happens (if at all). What does the founding team do during that time? Raise multiple rounds of funding to stay afloat hoping to find the elusive exit event. Wouldn’t it be much better if a business has profit mindset of a lifestyle business but an ambition to become a large company like a growth business?
I don’t see any incompatibility between these two ambitions and in fact most great non-Internet businesses had started that way (McDonald’s, Walmart, etc). These companies became behemoths not in 5-10 years but over course of many years while always keeping profitability in mind. You wouldn’t call McDonald’s as a lifestyle business, would you? With most Internet and technology startups, there is such a rush to grow big at expense of profitability. Why can’t it be a slow but steady growth over a period of many years?
Possibly related posts (automagically generated):
- Startup Lunch Delhi 2: How was the experience?
- A Lifestyle Entrepreneur
- Business ideas are dead; chase after market opportunity
Generated by BlogIt
BlogIt - Auto Blogging Software for YOU!
No comments:
Post a Comment