The Blade

I confess: I’ve spent the past several years confused by terms related to starting a company. Only recently have I begun to understand the nuances between words I hear and read every day. Given that others have told me they are also confused, I figured I’d try to clarify the confusion. Here goes…

Entrepreneurs start and own any type of business. That includes restaurants, home-building firms, decorating firms, law firms, tech firms, retail stores, solo businesses—really any type of company. Merriam-Webster offers this simple definition: “A person who starts a business and is willing to risk loss in order to make money.” So entrepreneurs take on the risk and reward of the enterprise as the owner.

Confusion: Many pundits are stretching the definition of the word “entrepreneur”. An Inc. Magazine title by CEO of the incubator 1812, Howard Tullman, reads: “Dear Graduates, You’re All Entrepreneurs Now.” Dean of the School of Entrepreneurship at Drexel University Donna M. De Carolis’s title in Forbes is, “We Are All Entrepreneurs: It’s A Mindset, Not A Business Model.” Pleazzzze. That’s like saying, “We Are All Cowboys: It’s a Mindset, Not A Business Model.” No. Cowboys heard cattle and live on a farm. We all can’t be cowboys just because we want to be one, or because of our “mindset.” Sorry, but entrepreneurs start businesses and risk taking a loss.

Startups are businesses established to innovate and grow rapidly. So if you start a traditional clothing store and don’t plan to expand rapidly, that’s not a startup. But if you programmed a new type of software for clothing stores and plan to sell it to thousands of them, that is a startup. Does a startup have to involve technology? Not necessarily, but is should involve innovation. For example, I consider Yeti Coolers to have been a startup during its first 10 years. Speaking of, how long can a new business remain a startup? According to a Forbes article, writer and startup expert Paul Graham says: “A company five years old can still be a startup. Ten [years old] would start to be a stretch.” That’s why the Economist Magazine recently cited Uber as “the world’s most valuable startup” because even though in 2016 Uber will probably report $5 billion in revenue, it was just started in 2009, so it’s still considered a startup.

Confusion #1: I was recently meeting with a bank executive to encourage his sales officers to call on more startups. Turns out, the executive was confused because he thought I was asking his bankers to call on “two guys, a dog, and an idea.” I was actually referring to their calling on large, successful startups with revenues upwards of $10 or $20 million. So startups can be established, solid businesses.

Confusion #2: Can a startup spring up from an existing corporation? For example, can Google start a startup? Eric Ries, author of the popular book The Lean Startup says a startup is “a human institution designed to create new products and services under conditions of extreme uncertainty.” That’s a convenient definition since he sells thousands of books about startups to corporations. But Merriam-Webster’s simple definition is “a new business.” Well, Google creates and innovates new products, but not new businesses because new businesses have separate owners. Businesses also have separate income statements and balance sheets, but I doubt Google manages its new products that way.

Founders are people who start and own startups.

Confusion: All founders are entrepreneurs, but not all entrepreneurs are founders. Get it? To be a founder, you have to start a business that innovates and plans to grow rapidly.

Lifestyle businesses allow entrepreneurs (or founders) to own their own business and also have the flexibility to pursue hobbies and other business endeavors without a boss, investors, or other stakeholders harassing them. So if an entrepreneur wants to work 20 hours a week and sacrifice productivity and growth that could come from working more, then he or she owns a lifestyle business.

Confusion: Many people falsely believe that lifestyle businesses don’t grow rapidly. They do –all the time. I call these “life-growth businesses.” The formula is simple: You maintain control of your company’s board of directors and right from the start, figure out a formula that allows you to fish, golf, hike, camp, and work whenever you want to—some weeks 10 hours, other weeks 30 hours, other weeks none. Basically, you use strategy, clever leadership, and brains to make this formula work. It’s your business, you can do whatever you want with it.

That’s it for now, but if you like this post, please let me know, and I’ll write another one with some additional annoying startup-related terms. But in the meantime, check out this popular Forbes article, “35 Startup Buzzwords Every Entrepreneur Should Know.”