Why You Should Build a Business, Not a Startup

September 29, 2015

5:00 pm

In a recent Reddit post on r/startups, user michele poses a major opinion when it comes to starting a company: that one should not build a startup; rather, the purpose should be to build a business. She argues that the main objective of starting a company should not be that near-impossible dream of a billion-dollar valuation, but should instead be focused on establishing a sustainable, revenue-generating business. The post has gotten a large share of upvotes since it was posted a day ago, signifying a certain level of agreement with the r/startups subReddit community; however, it also gives rise to one of the greater debates in the startup world: lifestyle company vs. “startup”?

In season 2 of the hit podcast series StartUp, the Dating Ring founders (spoiler alert!) ultimately arrive at stage in their company where they must make a decision about the company’s future. With little to no money left in the bank and no time to raise additional funds from investors, the founders ultimately decide to transform from a startup and into a lifestyle company.

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A lifestyle company is essentially what Reddit user michele describes in her post. That is: a company that’s earning revenue – and even a profit – at a slow but regular pace, and the main focus isn’t on rapid-fire growth, but rather on sustainability and growth driven by customers actually paying for your product or service. Writes Reddit user michele in her post:

“What you should focus on instead, is to build a small business, focused on growth and most important on delivering value to your customers. The focus from day one should be on getting clients to pay for your product. If you need a lot of money first, then it’s not a good idea for a business. A solid and healthy venture, should get the money it needs from its customers, not from VCs…the focus of a business should be on delivering value and making money while doing so, unlike a usual startup, whose sole purpose often seems to be burning money and thinking of ways to eventually turn a profit in the future.”

In her post, she goes further, laying out a simple outline on what it takes to build a business (which, in her opinion, is the right strategy to take) versus what it takes to build a startup (which she sees as most failed/failing startups pursue). Using Basecamp as an example, she notes how the company “didn’t sell-off to VCs” and how it focused on launching a product while still continuing to run a full-time consultancy shop – that, essentially, they focused on making money from customers throughout the entire process of building a company.

But this proposal to “build a business” is antithetical to what those in the startup industry perceive as our modern interpretation of what constitutes a “startup”. A “startup” in today’s interpretation, is a company that’s aimed at rapid growth armed with the expectation that big things will happen. Indeed, if the goal weren’t for constant growth, investors would see no point in investing millions of dollars (as they’d anticipate little to no returns in the near future). But if this interpretation of “startup” is what’s become generally accepted by the masses, why is the post on Reddit getting so many upvotes – in the r/startups subReddit, no less?

To the Reddit user’s credit, there are others out there that believe that our current mindset of what a startup is and should be is a deluded notion. In June of this year, for example, Betaspring launched the very first accelerator focused on helping revenue-generating companies scale – something that definitely falls outside the boundaries of the dominant startup industry. You can read the entire post yourself here and figure out where you stand on the issue.

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Ronald Barba was the previous managing editor of Tech.Co. His primary story interests include industry trends, consumer-facing apps/products, the startup lifestyle, business ethics, diversity in tech, and what-is-this-bullsh*t things. Aside from writing about startups and entrepreneurship, Ronald is interested in 'Doctor Who', Murakami, 'The Mindy Project', and fried chicken. He is currently based in New York because he mistakenly studied philosophy in college and is now a "writer". Tweet @RonaldPBarba.

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