Oct 20 2010

When is your start-up no longer a start-up?

A few days ago I received an email asking me if I had a “rule of thumb for determining when a start-up can no longer be considered a start-up”. The sender proposed a few potential answers but I thought this one might be a good one to put out there for feedback from readers. His suggestions were:

*Two consecutive  quarters of positive free cash flow?
*Drop pooled benefits company like Administaff for in-house benefits administration?
*Anything > C round, seeking to lever w/ mezz debt or file S-1?
*Name of company becomes a verb in our lexicon?
*Receive gov’t stimulus funding?
*Oprah uses your product?

For a long time I’ve asked entrepreneurs at what point their company no longer felt like it was a start-up. The answers were remarkably consistent, although I don’t think exactly answer the question in the way that was meant above. In any event, most founders tell me that around 30 employees is when their start-up companies start to feel like real businesses (or at least feel “different” – I think largely stemming from the fact that around 30 employees is the time when a CEO no longer really feels like the know all of the people that work for them). Of course depending on their funding and growth expectations this can happen at many points on a company’s growth curve and spending money (i.e., hiring employees” is not the mark of a business), so I feel that a better metric is probably the right one. Or more likely several better metrics.