With or without the hyphen, the word “startup” is as puzzling as it is ubiquitous. The Oxford English Dictionary Online defines it as “a business enterprise that is in the process of starting up,” usually as applied to a “startup company.” That seems about right—but is the media misusing the phrase when referring to Facebook, which was launched in 2004 and has long since finished “starting up”?
“People refer to Facebook as a startup—that’s not accurate,” says Andrew J. Rosenthal, an MBA student at the Harvard Business School who cofounded the Startup Tribe, a campus group for student entrepreneurs seeking to launch new businesses.
“I visited Facebook’s headquarters in a rental car, and I found out that they had valet parking. If you have valet parking, people shouldn’t call your business a startup,” says Rosenthal.
For the moment, it seems, the startup is increasingly associated with tech-based companies—even those that are now well-established—because those are often the most successful and the most visible. Yet that visibility itself depends on more than just success. Entrepreneurship has been around forever—what makes calling something a “startup” so special?
The OED traces the origins of the term, used in its modern sense, back to a 1976 Forbes article, which uses the word as follows: “The ... unfashionable business of investing in startups in the electronic data processing field.” A 1977 Business Week article includes the line, “An incubator for startup companies, especially in the fast-growth, high-technology fields.”
Startup also has digital associations, as in “startup menus,” “startup processes,” and other “startup” computer-related phrases. Wikipedia mentions that startup businesses often have “low bootstrapping costs”; that is, founders of a business fund their venture using their own capital rather than external capital. Bootstrapping comes from the phrase “to pick yourself up by the bootstraps,” which is also where the term “booting up” a computer comes from. Wikipedia explains that “boot” is a shortened version of “bootstrap load,” the process by which the computer starts up by reading a bootstrap sequence that tells the computer how to load in its own operating system.
It should be noted that startups needn’t be tech-based or web-based, but these technological associations hint at one reason why startups are so popular: anybody can start their own. In Rosenthal’s words, technology has had a “democratizing effect” because it has reduced the amount of money and capital needed to start a business. Meritocratic overtones are a part of the very etymology of the word—nobody gets their bootstraps pulled up for them.
According to Google N-Grams, a service that measures the frequency of a word’s use within Google’s collection of scanned books, the usage of “startup” steadily rose in the 90s and then peaked around 2002—that is, shortly after the spectacular burst of the “dot-com bubble” of the late 90s and early 2000s. “Startup” appeared less and less frequently between 2002 and 2008; the N-Grams tool doesn’t show any data from 2008 to the present.
“Startup” was being used less and less in books in the time when blogs and online media newly embraced the term in reference to a second generation of internet-based ventures, the most prominent being Facebook. For some reason, in the wake of the 2008 financial crisis, startups became increasingly popular.
“I am a huge believer in the idea that starting during a downturn is the best time to start,” says HBS Senior Lecturer Janet J. Kraus. “Opportunity costs are low, and if you’re able to turn a profit in a down market, then you will be very profitable when markets recover.”
Kraus co-teaches “Founders’ Dilemmas,” a course that addresses the challenges of starting a company, and says that cost is also an issue when considering the popularity of the startup. Kraus’ first website in 1996 cost $400,000 to create—not only because it was being built from scratch, but because a great deal of money had to be spent marketing the website and educating people about the Internet.
“You had to explain to people that the Internet existed, that there was something called ‘dial-up’, that you could buy stuff online, and that doing so was secure,” says Kraus.