Know Your Startup: The 6 Different Types of Startups
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The word startup is very common in the tech world. However, startups are not exclusively tech companies. They can be found in different sectors including healthcare, Business-to-Business (B2B) software and services, consumer goods and services, financial technology (fintech), and consumer media. Notable startups in each sector are Asana, Flo Health, Airbnb, Robinhood, and Reddit. Startups can also be classified based on the type of services they provide, their affiliation to a larger company, growth potential or scalability, and their objective. Based on this, there are 6 types of startups;
- Buyable startups
- Scalable startups
- Small business startups
- Big business startups
- Lifestyle startups
- Social startups
Let’s take a look at each different type of startup.
1. Buyable startup
These are startups that are founded with the sole objective of being sold to bigger companies for profit. Buyable startups are common in the technology and software sector. These startups are nurtured from the idea stage to the execution stage before being sold out to companies that are capable of providing the infrastructure for it to grow and become profitable. Examples are WhatsApp which was sold to Facebook, YouTube, Beats Music, and Beats Electronics which was acquired by Apple.
2. Scalable startups
Startups in this category have huge growth potential. Scalable startups receive much attention from investors because they have the ability to become very profitable in a short time. This type of startup is common in the tech sphere and some examples of scalable startups are Google, Facebook, and Uber.
3. Small business startup
Small business startups are quite literally small businesses run by individuals. partnerships or small teams. One advantage of small business startups is that due to their small size, they are mostly self-funded. So the founders are not often under intense pressure to scale up. The business grows at its own pace while being profitable and scalable if need be. Small business startups are often non-tech businesses such as grocery stores, travel agencies, bakeries, etc.
4. Big business startups
When large companies like Facebook, Google, or Apple find a niche they want to exploit, they can go ahead to start a new company. The new company is not a standalone business but is affiliated with the bigger and more established parent company. Startups that are found this way are referred to as big business startups. Big business startups help established companies adapt, innovate, and stay relevant in a market that’s constantly changing.
5. Lifestyle startups
Who said you can’t earn a living doing what you love to do? Well, nobody and that’s why lifestyle startups is springing up everywhere. These are businesses that are born out of passion. They start as a hobby and initially, the founders do not have any particular interest in making a living from it. Lifestyle startups mostly have to do with sharing a particular knowledge or skill acquired. Examples are classes that teach specific skills like dancing, gardening, photography, and floriculture.
6. Social startups
Not all startups are found with the intent of making profits. Social startups are charities and nonprofit companies that simply exist to do good. Like many other startups, social startups also have a specific goal or objective. Since they do not make any profits, these startups have to solicit grants and donations to remain sustainable. A common example of a social startup is code.org, an education nonprofit that wants to increase the knowledge of computer science in schools. They particularly focus on young women and students who are underrepresented in this field.
Final note!!!
So far, our focus has been on the different types of startups. For entrepreneurs who have a business idea, this will help you know what category your business will fall under. If you found this helpful, then I’m sure you’ll be pleased to know we can do much more to make your entrepreneurial journey easier. Kindly reach out to us at Epirus Ventures and we will be happy to assist you.
FAQs: Know Your Startup: The 6 Different Types of Startups
The six types of startups are: - **Buyable startups**: Created with the aim of being sold to larger companies for profit (e.g., WhatsApp, YouTube). - **Scalable startups**: Focused on rapid growth and high profitability, attracting investor attention (e.g., Google, Uber). - **Small business startups**: Operated by small teams or individuals, typically self-funded (e.g., local bakeries, travel agencies). - **Big business startups**: Projects initiated by large companies to innovate or compete in a new niche (e.g., ventures from Facebook or Apple). - **Lifestyle startups**: Passion-based enterprises for earning a living while pursuing hobbies (e.g., photography or dance classes). - **Social startups**: Nonprofit ventures aimed at societal benefit (e.g., code.org).
Buyable startups are created with the intention of being acquired by larger companies for profit, often concentrating on niche solutions in technology or software. Examples include WhatsApp and YouTube. Scalable startups, on the other hand, focus on aggressive growth and profitability by expanding rapidly, typically relying on venture capital investments. Companies like Google, Facebook, and Uber are examples of scalable startups.
Yes, small business startups can evolve into scalable or buyable startups, but it depends on their business model, growth trajectory, and investment. For example, a bakery with a unique product could expand into a scalable business by franchising or attract buyable interest if a larger company sees potential in acquiring the brand.
Big business startups are started by large corporations to explore new niches or innovations. For example: - **Google's Alphabet projects**, like Waymo (self-driving cars). - **Facebook's ventures**, like the development of Oculus VR. These startups help large companies remain competitive and adapt to changing market trends.
Scalable startups appeal to investors due to their massive growth potential and ability to deliver significant returns on investment in a relatively short time. Startups like Facebook, Google, and Uber showcase how scalability can lead to dominance in their respective industries with exponential revenue growth.
Social startups are created with the primary purpose of addressing societal problems rather than generating profits. They typically rely on grants, donations, and partnerships to sustain their operations, unlike other startups that aim for revenue generation. A notable example is code.org, which promotes computer science education for underserved communities.
Lifestyle startups often monetize by turning their founders' hobbies or passions into paid services or products. For example, a gardening enthusiast might charge for gardening classes, sell related accessories, or run a blog or YouTube channel with ad revenue potential.
No, startups are not exclusive to the tech industry. While many high-profile startups are in tech, startups can also be in sectors like healthcare (e.g., Flo Health), fintech (Robinhood), consumer goods (e.g., Airbnb), or nonprofit ventures like code.org.
Startup ecosystems provide the necessary infrastructure, resources, and networking opportunities — including accelerators, venture capital, mentorship, and community engagement — to help startups thrive. These ecosystems are essential for all startup types, ensuring they access the resources and expertise required for growth and success.
Entrepreneurs should consider: - **Their objectives**: Are they seeking financial profit, rapid scalability, or societal impact? - **Funding availability**: Self-funding suits small businesses, while scalable startups often require venture capital. - **Market demand**: Assess if their idea meets a genuine demand or solves a problem. - **Growth potential**: Decide whether scalability is a priority or if steady, sustainable growth is acceptable. - **Passion and skills**: Lifestyle startups, for example, thrive on personal interest and expertise.
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