Startups are a funny thing.
They can either make you a millionaire or make you go mad.
All kidding aside, the startup boom opened the door to riches for many motivated individuals with no prior business experience. It’s never been easier to compete with big businesses from the comfort of your own home.
The startup landscape is an ever-evolving world. We can see new business structures, startup types, and interesting business executions daily.
This article aims to provide you with a basic understanding of different startup types.
We also included examples of successful startups to motivate you on your business journey.
Types of Startups
There are different theories that divide startups into groups. In this article, we divide startups into six basic types.
- Scalable startups
- Large company startups
- Small business startups
- Social entrepreneurship startups
- Lifestyle startups
- Buyable startups
While no official theory exists, the chances are you will find similar types in other articles and startup literature.
We will dive deeper into every startup type. First, we’ll describe the characteristics of every type. We’ll mention who they are best suited for and what makes the type special.
We’ll top it off by mentioning successful startups that made it big in every startup type.
Let’s start with scalable startups.
|Did you know?|
You can use our startup name generator if you need help coming up with catchy startup name ideas for your new business venture.
These are startups that take a unique and innovative idea and rapidly grow the company to top-end revenue to achieve the highest possible return on investment (ROI).
Market research is one of the most important things for these types of startups. You can’t find exploitable market opportunities without detailed research.
Other things that influence the success of a scalable startup are:
- Amount of capital – You can’t successfully scale a business without the required capital for workers, equipment, and marketing.
- Human resources – You need highly capable people to grow your startups.
Scalable startups are almost always funded by venture capitalists.
This startup type is most suited for innovators that want to change the industry. It’s best suited for you if you want to be the leader in the market.
Two famous examples of scalable startups are Facebook and Google.
We all know the Facebook story. Mark Zuckerberg started the brand in college with a group of his friends. The app (then website) quickly became super popular, and it grew beyond anything that has been seen to that point.
There’s even a hit move made after the rapid growth of Facebook.
Google is an example that shows how capital and human resources help startups scale more rapidly. Google is known for making acquisitions of smaller startups. The bigger its market share, the more capital they have.
Because of the capital, they are capable of attracting top-tier talent. We can see how this helped them scale in the past decade. The richer they become (money-wise and talent-wise), the faster they grow.
Large Company Startups
These types of startups are also called offshoot startups. This is the only startup type that doesn’t start from the ground up.
These startups branch off from large companies to become their own entities. They are backed by the capital of the parent company, and these companies rarely look for outside sources of funding.
Large companies launch new startups when they want to enter new markets, test a new revolutionary idea, or when they want to disrupt a smaller competitor.
These companies are independent of the parent company. This allows them to test new methods and try unconventional things without affecting the brand of the parent company.
This startup type is best suited for large established companies that want to test new waters or want to compete with new businesses without disrupting their existing customers.
An example of a large company startup is Sidewalk Labs, an Alphabet (Google) subsidiary. Sidewalk Labs aims to improve the quality of life in urban centers.
They proudly share they are part of Google on their website, which helps them build trust and authority. But, since they are a separate company, they don’t have to follow all of Google’s rules. They can experiment with new ideas and different approaches.
Small Business Startups
In a sense, small business startups are the exact opposite of scalable startups. The priority for small business startups is longevity instead of scalability.
Small business startups aim to provide enough financial stability that ensures smooth operations. These startups usually cater to a small target market.
It’s rare for these startups to get funded by venture capitalists. Most often, they get their starting capital from the bank or bootstrapping the business from the founders’ savings.
Another popular funding method is crowdfunding in case the founders need more starting capital.
Family-owned businesses are a good example of these startups. Other examples include local barbershops, retail stores, and bars.
This is a great startup type if you want to build a long-lasting company. A small business startup is also the right pick if you want to give back to the community.
A great example of a self-funded small business startup is BuzzSumo. This content marketing shows which articles and content pieces receive the most shares and attention from online visitors.
BuzzSumo was founded in 2014 without any outside investors. The company grew to $2.5 million in revenue in 12 months. They built a loyal following of free users, which they later turned into paid subscribers.
Our business name generator can help you find interesting name ideas for your small business. You can even instantly check if the names have available domain names.
Social Entrepreneurship Startups
These types of businesses aren’t built with the goal of building wealth for the founders. Instead, the goal of social entrepreneurship startups is to have a positive impact on the world.
Most social entrepreneurs solve social, cultural, or environmental problems. The phrase “social entrepreneurship” is broad and describes any privately owned organization that strives to reach socially conscious results.
These types of startups often apply for different grants to fund their operations. They also use crowdfunding platforms to find the resources they need to run their business.
This startup type is best suited for you if you have an idea that could solve a big problem for disadvantaged people and communities. You should start a social entrepreneurship startup if profits aren’t what drives you forward.
If you want to change the world and if you’re not driven by the financial success of the company, then social entrepreneurship might be the right thing for you.
Examples of social entrepreneurship startups include Arborea and Orange Fiber. Both startups show how social entrepreneurship can be turned into profitable businesses.
Arborea is a startup that fights pollution with microalgae. The founder, Julian Melchiorri, developed a bio solar leaf that removes carbon dioxide and produces oxygen at a rate equivalent to 100 trees.
Orange Fiber is an Italian startup that turns waste from the Italian orange juice industry into sustainable fabrics. These recycled materials are lightweight and were already featured in the works of famous fashion designers.
A lifestyle startup usually starts with a passionate individual sharing their hobby with online followers. Your favorite influencer or YouTube star probably owns a lifestyle startup.
These types of startups are becoming increasingly popular as they enable founders to turn their hobbies into well-paid careers. The rise of social media turned many people into online entrepreneurs.
This is a great startup type if you have a hobby or a passion that you want to dedicate all of your time to. You have to be very focused, driven, and motivated if you want to build a thriving lifestyle startup.
A great example of a successful lifestyle entrepreneur is Tim Ferris. He was an online influencer before that even became a thing.
He reached stardom when he published the book The 4-Hour Work Week. The book motivated thousands of people to pursue the dream of entrepreneurship. Tim later started a successful podcast that is still going strong.
He also authored more books and was featured in some of the world’s biggest online and offline publications. His passion for trying new things and testing unconventional ideas helped him become of the most followed people on the internet.
Other examples of successful lifestyle startups include Gary Vaynerchuck and Pat Flynn. They both turned their passion into multi-million dollar businesses that got successful because they shared their ideas with the world.
Buyabe startups are startups made with the intention of being sold. These are very common in the tech industry. There are a lot of apps and tools that developers create only to sell to someone else.
This type of startup is most suited for serial entrepreneurs. These are people who are driven by the development of new ideas. Serial entrepreneurs are amazing at coming up with new approaches and concepts, but they quickly get bored when they start operating the business.
Buyable startups are also a solid option if you have a great idea that has tremendous growth potential. In that case, it might be better to sell the startup to someone that can develop the idea instead of looking for capital.
In short, buyable startups are best suited for people that want to develop ideas but don’t want to commit long-term.
Tech giants like Google, Uber, and Amazon are constantly buying small startups with potentially great products. You can check for the latest mergers and acquisitions in the startup space to see examples of buyable startups bought by big tech companies.
As you see, there are at least six different types of startups. We explained what makes them different and who they are most suited for.
All types of startups provide growth opportunities. It’s up to you to decide which one best fits your needs.
We hope the success stories we shared inspired you and will motivate you to work even harder on your own business ideas.
You can refer to different guides and articles on our blog page if you need any help developing your business.