The Race to Break the Start-Up Barrier

When does a start-up stop starting up? The challenge in answering this question is that there is no universally agreed definition of a startup.

Alex Wilhelm of TechCrunch attempted to define what is and isn’t a start-up, stating “If your company has, or is any of the following, you have to hang up your Startup Uniform”:

– A $50 million revenue run rate

– 100 or more employees

– A valuation of more than $500 million

Using this criteria, we collated data of globally famous start-ups to examine trends about breaking the startup barrier.

What companies broke the start up barrier first?

We can see that social media startups break the start-up barrier faster compared to other industries, with most doing so in 3 years or less. All of these companies have also gone public in 8 years or less.

SaaS (Software as a Service) companies also dominate the list, many of which broke the barrier in 4 to 8 years. Most of these companies have also gone public but took longer to do so at 8 to 13 years.

So why did some companies take longer than others? Based on our research about each individual company, those that broke the barrier early had adequate funding to scale up their business. This is one of the indicators of a healthy start-up growth, as we have previously discussed in our blog post, End of the Grind: When Does a Start-Up Stop Starting Up?

Another indicator is a healthy demand for product or service. Companies like Airbnb and Uber became disruptors in their field, simply because they found a gap in the market and they created a solution for it.

When Facebook was starting, not many believed that it can surpass its social media predecessors. However, they got three indicators of success right: Having the right team to lead your business; the ability to compete (and win) against your close rivals; and having a pricing structure that makes you profitable.

By getting the likes of COO Sheryl Sandberg who transformed Facebook’s business model, the company became profitable after focusing its strategy on advertisements. Also, they were decisive when it came to acquiring competitors like Instagram.

The last indicator is having a marketing and branding plan that helps you stand out. Among the start-ups in our list, Tesla has been making noise in the news due to its commitment to green technology.

Taking into account all of these indicators for success, is it guaranteed that you succeed if you ticked off everything in the list? Not necessarily.

Based from our list, several US start-ups have broken the barrier way before their counterparts in other countries. The access to funding in the US, as well as the founders’ connections, may have also played an important role in their development.

That said, start-ups based in other countries should not be disheartened about scaling up. With the right strategy, partners, and tools, including access to high-speed internet broadband, you could be on your way to breaking that barrier.

Methodology

We have based our definition on Wilhelm’s criteria. Data about the number of employees during the start-ups’ early years was scarce so we have based our judgement on revenue and valuation. In any instances where data was incomplete and the exact year of hitting the $50m revenue mark or the $500m valuation mark was unclear, we selected the middle point in between the two closest available data points.

From there, we have narrowed down our selection to the 20 companies with the most complete data in terms of revenue and valuation from the years they were founded until they broke the barrier, according to Wilhelm’s 50-100-500 rule.

Finally, we made sure that the start-ups on the list were representative of their industries to show the correct proportion based on the original list.