Don’t Build a Startup, Build This Instead

I’m going to say something that I think should be obvious, but really needs to be said: every new business is not a startup.

The reason this might not be so obvious is that over the last several years, the definition of a startup according to most people has expanded so much that it seems to cover anything and everything under the sun.

Take this Investopedia definition which says that a startup is:

“A company in its early stages where the founders think there is some demand for their product or service.”

Or this article from startups.com that interviewed many different startup founders, with some definitions covering anything “solving a problem” or “doing something differently.”

I get it. There is so much hype around startups that everyone wants to think that’s what they’re building. But participating in the startup hype when it’s not right for your business may not only waste your time, it might kill your business.

Let’s look at why that’s the case and what you should be building instead.

All new businesses are not startups

Legendary investor Paul Graham (who I don’t always agree with), wrote a great article 10 years ago explaining the difference between a startup and other businesses.

Very simply, he wrote that:

Startups = Growth

He goes on to explain that what makes a startup different from a barbershop or a new bar opening up in your neighborhood is that they have the combination of:

Something lots of people want
The ability to reach lots of people

A small business is limited by the amount of people they can reach. So for example, even though everybody needs their haircut, a barber can only cut so much hair. They cannot scale their service to meet the whole world’s demand for haircuts.

What really separates startups from regular businesses is the potential to scale and their ability to grow fast in order to reach that scale. Building on this, a startup needs to have a unique idea to make this happen, since others would have already capitalized on such a big market opportunity if it were obvious.

So from Paul Graham we have three key points that are the lifeblood of startups:

Potential to scale
High growth
Unique idea

How many people out there who say they are building startups are actually meeting all three of these criteria? Or even just one?

I’d say not that many.

And as a result, a lot of the advice out there geared towards startups will be worthless and might actually be harming businesses that should be run differently.

So what is the right way to build a non-startup?

Here’s some of the lessons that I’ve learned from building Epilocal, as a bootstrapped, slower growth business.

I don’t call what I’m doing a startup. I call it a digital small business and here’s how you can build one too.

Start with a non-unique idea

The startup world is obsessed with ideas. You have lots of fancy frameworks that lead to brainstorming on white boards and post-it notes that make great pictures for company innovation events and startup incubators.

But after lots of time and effort, you are left with just some words on a piece of paper. Don’t get drawn into this startup trap of looking for the perfect, world-beating idea.

Start with something that’s not that unique, but is something that you know you can do better than someone else. For example, one of the first digital products I built was a connector to bring Mailchimp data into Google’s Data Studio analytics platform.

Was it the first connector that did that? Nope

But I made it simpler and cheaper with a similar amount of functionality as other products out there.

Clearly this is not a world-beating idea, but it was a great start that got me selling products online and learning about everything that involves. And once you get started, you think of bigger and bigger things.

Don’t pin all of your hopes on one thing

Which brings me to my next point. If you think about Paul Graham’s definition, a startup needs to be ruthlessly focused on growing their big idea, so they don’t have time to be distracted. They are going to make it big or go bust on the strength of their one, single product.

As a small business, you don’t have to be like that. But way too often I see people taking huge personal risks by attaching their entrepreneurship dreams on a single bet.

There’s a reason that venture capital firms have big portfolios of lots of different companies. Startups are geared to either succeed or fail quickly. And most of them do fail.

But that doesn’t mean that all new businesses need to be so high-risk. You can set yourself up in a much safer way using the same concept that investors do: diversification.

In other words, have multiple income streams from multiple products and skills.

For example, I do some consulting/freelance work, I sell multiple online products and I also do some paid writing.

Over time, I would like to increase the product share of my income which would allow me to grow more, but I’m perfectly content with this being a long-term goal. While the other things that I do allow me to pay the bills while giving me lots of time to work on my products.

Not only that, my writing and consulting work teach me new things that then give me new ideas for products. This has created a very healthy and sustainable cycle where I feel secure about my financial situation while also feeling that I’m moving my ideas forward.

New businesses don’t have to be so risky

If you diversify and work on ideas that are not exactly groundbreaking, you are naturally taking much less risk than someone who is trying to do one big thing that’s never been done before.

And beyond that, you can do other things that lower the risk of your new business.

For one, you can start some of your activities before actually quitting your job. I’ve been writing for close to five years now, well before I went full-time on my business. During this time, I also was doing some light freelance tech work on the side.

Those two skills that I developed while working full-time now form the basis of my consulting work. And not only that, they are the two primary activities I do in order to build my product business as well.

You may feel like you have to quit your job to go all-in on a big startup idea, but you don’t need to quit your job to start building skills that you can use to build a small business.

Another way to lower the risk of starting a new business is to focus on a niche market where there’s not as much competition. Bonus points if this is a group of people that you already belong to. (say it’s some hobby you’re interested in or an industry you’ve worked in in the past)

For me, I’ve focused a lot of my work on independent local news publishers, which is a very niche market. Although I didn’t have experience in the past in this niche, I’ve been able to learn about it while I do freelance and pro-bono projects to help people in the space.

As I do more and more of this, I meet more people in the industry and I get referrals for new clients and potential users of my products. And since it’s a niche market, it’s been quicker to get my name out there than it would have been otherwise.

While at the same time, bigger companies find the niche to be too small to care about, so there’s less competition and very few products that directly address their needs.

Bottom line, startups may need a billion dollar market that proves they can scale, but most people don’t.