Not long ago I came across this thread in the Facebook group "Entrepreneurs and Startups in Malaysia", in which the question was: "When are startups no longer referred to as startups?"
I asked my team what they thought about it and we all agreed that there didn't seem to be a general consensus on the criteria yet.
From what we've seen, companies as young as 5 or even companies as young as Grab are still referred to as startups.
How can a company then be called a startup? Check out what Malaysian entrepreneurs have to say on the matter.
When it comes to maturity
The most popular response came from one commenter who said that companies are no longer labeled as startups when they create businesses.
To quote her comment: “For example, a boy is called a man when he is mature. Maturity is an internal thing. "
“To corporate, the company must have found a repeatable and scalable company to be able to afford corporatization. Company means that the company is guided by systems and processes and no longer just hectic and experience, ”they shared.
They defined the due date in a number of ways, whether it was about getting a stable, positive cash flow, not having a critical need for seed capital, or even being ready to burn the extra money for growth.
One commenter who explained his attitude towards a startup as a "pre-mature baby"
It seemed like many others found her comment pleasant. Another commenter said, “There are actually five stages in the life of a company. That means: brainstorming, startup, growth, expansion and maturity. "
"Ideally, if you know when you have finished your startup phase, you will have recurring income that you can use to cover your business expenses," they added.
One commenter believes that unless seed capital is critical, a company is a startup
Another commentator suggested that companies that haven't generated enough net cash flow to sustain themselves or that still need investor money to expand should continue to be considered startups.
Some prefer to set the bar themselves
Among these suggestions were entrepreneurs who prefer to set the closing conditions for themselves rather than following the status quo.
An entrepreneur who runs 4 companies announced that the company must have at least half a million in sales for at least 3 years in a row.
"At the same time, you have to have the entire marketing, finance, human resources, operations and customer service business system in place," they added.
Regarding this 3 year timeline, there have been a few commentators who felt a similar way.
- One commenter who believes a company will be in trouble if its 3rd year earnings are still negative
- A commenter who thinks if you can't do it in 3 years, you won't make it in 5 years
Another commentator also justified their definition. "We have already asked Cradle and MDEC this question. In fact, they are not offering grants for this project if it has been in operation for more than 3 years. But there are still opportunities to negotiate."
However, some startups may find this difficult to achieve while choosing to persevere. Therefore, according to this commentator, smaller goals like these also apply:
One commenter who believes that even a small goal like graduating your 10th client is valid
Some commentators also shared that when a founder or leader feels like they've already grown, it may just be about the mindset behind it.
A commenter who thinks it's about how the founder is feeling
However, one commentator delved deeper into this definition of “mindset” and suggested the difference between the mindset of a startup and a company.
“I think the difference between a startup and a company is that the startup is focused on valuation while the business is focused on profit. They can be a company and not be profitable so it's a mentality thing, ”they shared.
“However, startups need to have good funding ratings and not be profitable. Because the moment they are profitable, their valuation goes down. Strange I know but it's true "
What are other biz-driven platforms saying?
In this Tech In Asia article, they suggested that small businesses tend to focus on making profits as quickly as possible, while startups are exploring a new business model or aspect of a market with potential for much larger growth.
Hence, often the goal of small businesses is to provide the business owner with a living. On the other hand, a startup is a riskier experiment designed to create new markets or disrupt existing ones.
However, the completion of the label can be due to various factors such as being listed on an IPO, product market adjustment, a change in mentality, etc.
This Business Insider article also states that while a company is a startup until it is fit for the product market and begins to scale, it is up to the company whatever they choose, said one employee of a VC company.
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From this thread of discussion, it is safe to say that some Malaysian entrepreneurs play by the norm of completing the startup label, while others choose to play by their own rules.
Whether or not this label is beneficial is still open to debate. However, the Companies Act passed in Malaysia in 2016 has made it easier to start a business at a low cost with less paperwork.
According to QuickBooks, some of these benefits are:
- A person can start a business and still enjoy the limited personal liability benefits that a business offers.
- Lower operating costs (in the past, small businesses had to use outside companies, including accountants at cost, to run their businesses).
- Start-up owners and teams can focus on their energy producing products and services (in recent years entrepreneurs have had to focus on lengthy matters such as general meetings, general meetings, filing memoranda and drafting resolutions).
Ultimately, it seems clear that there is no right or wrong how long a company has been called a startup for its own reasons.
- You can find more of the opinion pieces we've written about here.
- You can find more startups we've written about here.
Selected image source: Carpit pitching at SITEC SAP 2019