6 Types of Startups: A Guide to Finding Your Place in the Startup Ecosystem
The term “startup” is very trendy nowadays and is used frequently in the business landscape. In startup hubs like Silicon Valley or Hong Kong, entrepreneurship is becoming an increasingly prevalent idea, and a large number of startups are getting established every day. The word “startup” may evoke an image in your mind of a group of young techies working on new technology in a garage. However, this is the opposite of reality, as the startup ecosystem extends far beyond the realm of technology.
Although a startup is popularly defined as a tech company with fewer than 100 employees, this definition is unable to explain the entire philosophy of a startup. The Silicon Valley legend, Steve Blank, defines a startup as a temporary organization built to find a scalable and repeatable business model.
A startup is not just a tech company but rather a journey that helps you determine what works, what scales, and what sustains. If you plan to build a startup, you need to understand the six types of startups. This startup guide identifies the six common types that can help you find your purpose. Each startup type follows the same core principle of building something new but differs in its objective. The six types of startups are explained in detail below.
1. The Lifestyle Startup
The lifestyle startup is an output of the founder’s passion. Lifestyle entrepreneurs build a startup based on what they love. They do not chase billion-dollar valuations and want to earn money by doing something they like. A lifestyle startup allows entrepreneurs to turn their interests and skills into a sustainable income source.
Focus on Flexibility and Fulfillment
Lifestyle startups are generally not established to scale rapidly but to sustain the preferred way of living of the founder. They provide flexibility and control to the owner, allowing them to make their own decisions. Lifestyle entrepreneurs can bring creativity to a startup’s operations and offer unique services or products.
For instance, a travel blogger can build a lifestyle business that provides travel tips or adventure experiences. Similarly, freelance web developers or coders can also start their own businesses to offer their services. All these examples show that entrepreneurship can be personal and fulfilling, not just high-stakes and high-growth.
2. The Small Business Startup
Small business startups are a vital part of the everyday life of a place. They are at the core of local economies, delivering small-scale products and services. They are established to provide a livelihood for the owners and their families, as opposed to international supremacy. A small business may not become a world giant, but it embodies the true spirit of self-sufficient entrepreneurship.
Local Roots and Long-Term Sustainability
The primary purpose of starting a small business is to create a livelihood. They are created with clear goals, such as profitability, stability, and community impact. These startups typically rely on personal savings, family funding, and small business loans to get started.
These startups are crucial to the startup ecosystem, as they create jobs, support local supply chains, and strengthen community networks. Grocery stores, salons, bakeries, travel agencies, and service providers such as carpenters, accountants, and electricians are examples of small business startups.
3. The Scalable Startup
Scalable startups are born to be big. They are founded with the perspective of transforming the world. Together, the ideas of the founders and the abilities of the employees help scalable startups achieve their objectives. Scalable startups are those that have been founded through an innovative idea and are developed at an accelerated pace with subsequent improvements. This type of growth can be termed “hockey-stick growth.”
Innovation and Investment
Scalable startups are based on scalable business models. They strive to be innovative and gain worldwide recognition. Personal savings will not meet the financial demands of these startups, and they usually require venture capital to enhance their business. They hire the best and brightest minds who possess the necessary skills and knowledge to help the startup achieve success.
Scalable startups may start small, but they are designed for massive growth. Google, Facebook, Amazon, Airbnb, Uber, and X are notable examples of scalable startups that began small but have become global behemoths.
4. The Buyable Startup
Over the last few years, a significant number of buyable startups have emerged. These startups are built to create value, a product, or a team that attracts acquisition. These startups do not focus on building an empire.
Fast Execution and Strategic Positioning
Their primary goal is to develop a new product or offer a unique service and sell it to a larger company after it has been proven viable. Buyable startup founders aim to create something innovative that addresses a pressing problem. In this way, the startup can be sold to a larger player.
Many startup entrepreneurs innovate quickly, meet a market need, and position themselves for purchase. This type of startup thrives in ecosystems where acquisition is a common exit strategy. For instance, an entrepreneur can build an app development company that creates a niche product, which gets acquired by larger companies like Google or Meta.
5. The Social Venture Startup
With increasing impact on the environment and society, social venture startups have become mainstream in the startup ecosystem. These startups combine business innovation with an impact. The success of social venture startups is not only measured by profitability but also by their positive impact on society.
A Dual Focus on Income and Impact
Founders of social venture startups establish them to solve social, environmental, or humanitarian problems. Unlike a scalable startup whose goal is to maximize profit, these startups focus on making the world a better place to live. These startups demonstrate that profit and purpose can coexist and bring about positive change in society.
Social venture startups may not experience rapid growth, but leave a long-lasting impact on society. Renewable energy startups, sustainable agriculture ventures, and education technology platforms are some good examples of social venture startups. These startups serve the underserved communities and blend impact with income.
6. The Large Company Innovation Startup
Even large companies are required to reinvent themselves continually. They need to adapt their business model to reflect changing customer preferences, emerging technologies, and evolving market requirements. This leads to the birth of prominent company innovation startups.
Foster Agility and Fresh Thinking
A large company innovation startup is formed to create a new business model within an existing corporation. These startups bring innovation to the corporation without disrupting its core operations. They make a new business model to keep the parent company competitive in the dynamic market.
How it works
The fact that the startups have been successful is due to their flexibility and creativity, which are often lacking in large companies. It does not keep it in stasis, but instead helps the company remain relevant in the volatile world of the startup ecosystem. The contributions of prominent company innovation startups offer the benefit of overcoming the barrier between startups and established players, demonstrating that innovation is not restricted to founders.
Conclusion: Find Your Path
There is nothing like entrepreneurship without having a purpose for the startup. Each entrepreneur belongs to the ecosystem of startups and should understand the type of startup they operate. The first step in building a successful business is to understand what your startup is, whether it is innovative, cost-effective, independent, or impactful.