HOW TO INVEST IN A STARTUP

The Definition of a Startup

I work with funds, entrepreneurs, and startups of all kinds across the state of Texas. I was recently talking with an international fund manager looking to invest in Texas deals. He said his investment group wanted to invest in startups. I asked him,

“What is your definition of a startup?”

He looked a little surprised at the question as he like most people assume that everyone shares the same definition.

I’ve learned over the years that where you are in the world molds your definition of what counts as a startup.

In Austin, if you have a great idea, and two people working on it, then you’re a startup.

In Dallas, if you have $1M of revenue, then you’re a startup. If you have less than $1M, then you don’t exist.

In Shanghai, if you have $10M of revenue, then you are a startup.

I once heard a fund manager refer to a $20M company as a startup.

What makes entrepreneur communities vibrant is their inclusion of all players in the ecosystem, not just those with substantial traction. Startups without significant revenue can bring innovation, ideas, support, and other essential drivers for the community. I welcome the broader definition of a startup as it creates a larger community within which to share ideas and foster innovation.

So ask yourself: what is your definition of a startup? Make sure your own definition is clear before you consider investing and always keep these 5 key principles in mind:

1. It always takes longer than you think.
2. It costs more than you thought.
3. There’s always a better idea.
4. The journey is the reward.
5. The team is what you will remember.

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