Startups, like babies, don’t stay small long. By their nature, they quickly move one of two ways:
1. They become bigger, by being acquired by a larger company, or through funding that allows for growth.
2. They fizzle out and die.
While there’s not yet an industry standard for determining when a company stops being a startup, experts have their own opinions about when that change occurs:
- When it begins to scale
- After 2 quarters of consecutive positive free cash flow
- When it’s more than two years old
- After 2 rounds of funding
Time to Operate Like a “Real” Business
No matter what your definition of what makes a startup not a startup, the time comes when you have to shift your thinking and operations model. Gone are the days when you had no one to answer to. Now, even if you’re the boss, you have to account to investors, partners and lawyers. Things move slower on the other side of the startup fence. You’re not the only decision maker anymore, so everything, down to the brand of toilet paper your company uses, has to have a unanimous vote from the Board.
You also have to look out into the future and decide what you want to do. If you’ve been acquired, you may choose (or be invited) to act as as consultant as your startup transitions into being a piece of a larger corporation, or you may take the money and run. Often for startup founders, there’s a lot of emotional attachment to the company, so it’s hard to let it go and give up control to a corporation.
What’s next for you, if you’re not running your startup? If your acquisition pricetag was hefty enough, sitting on a beach sipping from a coconut might be an appealing option. But if you’re like a lot of other serial entrepreneurs, you might not be able to fathom not working. You’ve already got the connections and the experience of running a successful startup, so why not create another?
My point here is, running your startup is a very finite situation. Keep your eye on the future and know what your next step will be so it doesn’t take you by surprise.
Photo: Flickr user dierken. Creative Commons 2.0.