Businesses that are just starting out often refer to themselves as startups (which is inappropriate given that startups are funded differently, scale differently, and have completely different KPIs). Take real estate brokerages, for example. An increasing number call themselves startups, but when you look at the definition of a startup, can you really call yourself one?
Small businesses and startups have very different definitions (and there’s no shame in being a small business or an “innovative brokerage”). Let’s discuss.
1. Startups have a different goal altogether.
Typically, startups are about growth. They’re designed from day one to scale extremely quickly. Small businesses are often limited by a target market or geographic location.
There’s nothing wrong with that, but they aren’t scalable the same way an international software brand is. Think about scaling in terms of a beauty salon versus MatchCo, an app that uses technology to create a foundation just for you.
A franchise does not a startup make.
2. Startups generally seek outside funding to accelerate growth.
Startup founders often give up equity shares to generate funds before becoming profitable. Small businesses are typically self-funded, bootstrapped into profitability, and owned by one or a select few.
A small business venture is typically less risky than a startup, too. The idea behind a small business venture is profit, and you want the business to last. Startups are structured to be sold or acquired once it hits critical mass – a “startup” is temporary.
3. Startups disrupt the industry.
Think about these companies – AirBnB, Google, Dropbox, Facebook, even Apple, a long time ago. In their early days, they were startups. It was risky to invest in these companies as they were trying something new (not iterating on something like the real estate practice which is one of the oldest professions in America), but they have outshone their competitors. They disrupted the marketplace. That’s what a startup does.
And it doesn’t always work. Sonitus Medical attempted to disrupt the hearing aid market. They raised almost $90 million in funding before the Centers for Medicare & Medicaid Services decided the product wouldn’t be covered. The company held an auction and closed its doors.
Brokerages have experimented with paying salaries, going paperless, or having all agents working remotely – these are all fabulous innovations and iterations, not disruptions.
We’ve been on the forefront for over a decade of ushering in the era of indie brokerages, paperless real estate brands, and counter-culture companies, but brokerages are simply not startups, and this is not up for debate. Iteration is not innovation.
Don’t call yourself something you’re not – be an “innovative broker” and rock it, because you’re not a temporary company not working within geographical constraints, seeking to scale so rapidly that you’re acquired for your indisputable disruption.
And finally, don’t fall for real estate brokerages pitching themselves as “startups” when they’re misinformed and really mean they’re simply, and beautifully “modern.”