Welcome to the Big Leagues: At What Point Are You No Longer a Startup?

Signs your business is no longer a startup

A startup is typically considered to be a fledgling business. However, some companies describe themselves as such regardless of their longevity and success. But technically speaking, there are some clear signs when your organization no longer fits into the startup category.

You’re acquiring other startups.

One of the strongest signs your business is no longer a startup is you are acquiring, or looking to acquire, other companies. This could be for a number of reasons. Recruiting talent is incredibly competitive. So, instead of trying to poach top-tier candidates from other companies, it may be more beneficial or cost-effective to acquire a company with the talent you desire. Another reason to acquire other businesses is to control more verticals, giving your company more of a competitive edge in the industry. When a business is in a position to purchase another company, they have the capital and workforce to be a competitive business.

You’re making products fit for the current market.

At their inception, startups are often researching the market by evaluating their products or services compared to successful companies. Once a business has achieved its desired product or service and is actively selling it, it has adjusted to the market. Having a complete product that is sold, while also developing updates or new products, is a sign a company has moved beyond its startup phase.

You’ve become more bureaucratic.

Startups usually have an informal chain of command and a loose management style in the beginning. Since the initial team is at most a few people, there’s an opportunity to be avant-garde. As the team grows and more people are handling responsibilities, the business becomes more bureaucratic. Leaders and executives are now using more official and formal channels of communication. There may also be a standardized operating procedure. This type of structure is implemented for the sake of clarity and consistency among the staff. When processes become less flexible and more formal, a startup has begun transitioning to an established business.

You go public on the stock market.

For startups, becoming publicly traded usually signifies an effort to raise funds for growth. It’s a chance for the public to buy and sell stocks of your company, which can often prove fruitful for those running the business. That shift in size or scope — as well as the steps to get there — can point to a more established business. 

For example, your underwriter in the IPO process is looking for requirements like consistent revenue, growth potential and promising management. Even just having the option to go public is a sign that your startup has achieved significant growth and development. 

You reach a specific revenue and/or profit threshold.

Since startups are reliant on seed capital, financial benchmarks can be an effective way to measure your growth. One of the most well-known growth frameworks is the 50-100-500 rule. Using this yardstick, your company is no longer a startup if you have a $50 million revenue run rate, 100 or more employees or are worth over $500 million.

However, the 50-100-500 rule is not the only metric to measure whether your business is a startup. You may transition out of your startup stage once you raise over $1 million, grow your team more than 20 percent each year or engage in international business. 

Signs your business is still a startup

Some leaders are eager to portray their companies as established, even when reality suggests otherwise. Companies should still consider themselves to be in startup territory if they meet the below characteristics.

You’re still testing markets.

You are still in the startup phase if your company is currently testing business ideas and taking them to market. It could take years to identify your target audience and finalize its concept. After you do, you still need to determine how to stand out in the marketplace. Once your company is out of the brainstorming phase and your prototypes become final products with a clear sales plan, then your business has grown beyond the startup phase. [Related article: How to Create a Marketing Plan for Your Startup]

You’re still working on your branding details.

Initially, startups are usually so focused on developing their product that they don’t have a clear brand. A solidified brand makes your business identifiable to consumers, but that comes once you’ve established your product line, company mission and culture. It could take time to create a name, logo, visual style and written tone that represents your organization. And those things may change as your company develops new products or modifies its goals. If your business is still developing its brand, then you may not be ready to graduate to the big leagues.

You’re still hiring integral employees.

A startup is often still in the process of hiring its most essential employees. In the beginning, the founder typically assumes all or most of the company’s responsibilities and, as the business grows, they begin to hire staff to fill the most critical roles. These roles include a chief executive officer (CEO) and a chief operations officer (COO) to ensure the organization is running smoothly, a product manager to oversee the development and release of your product, and an accountant to manage the company’s finances. If these roles remain vacant, your business is likely still a startup.

The benefits of moving beyond the startup stage

While startups are often portrayed as hip and cutting-edge, there are distinct advantages to taking your business to the next level.

You’ll attract and retain more qualified employees.

Many startups face challenges finding candidates with strong communication skills. This is often because startups usually don’t have an established employer brand and a clear message that they can pitch to candidates. To attract the right people for your company, establish an identity that sets you apart from other workplaces. It takes time to build that identity, but by fostering an organization with a clear personality, culture and reputation, you’re more likely to appeal to top-tier job seekers. Plus, once you’ve moved past the startup stage, candidates are less likely to see working for your business as a risky proposition.

You’ll increase your budget.

Larger companies and corporations have bigger budgets than startups. This is not only because of the profits they’re generating but also the substantial investments from funders seeking to capitalize on the business’s expected growth. As your company grows, you’ll be able to increase your budget, allowing more flexibility to scale and hire new employees. While a small business always needs to keep budget planning in mind, having more dollars to work with can be a game changer. 

You’ll cultivate brand awareness.

Becoming a bigger company often means you’ve achieved greater brand awareness within your industry. As your enterprise grows and your staff increases, more people become aware of who you are and what you do. Growing your business out of the startup phase accelerates your brand awareness and gives you access to a larger audience. But garnering attention, of course, doesn’t happen overnight. To get started, consider using conferences to generate PR for your startup.