Ah, startups – the rollercoaster of the business world that can either catapult you to unprecedented success or serve as a harrowing, yet educational, tale of what not to do. The last few years have been nothing short of a startup renaissance. Innovators and creators are launching ventures everywhere, from home offices to Silicon Valley. The path from napkin ideas to becoming a billion-dollar startup is now more reachable. In this article we explore 7 different types of startups. Using real-world examples, we highlight their succeeding in different categories.

But here’s the kicker: startups don’t all come from the same cloth. Some aim to scale to the moon, while others focus on building a loyal local clientele. There are startups that aim to disrupt markets and others that want to save the world – one social issue at a time. So, how do you navigate this intricate maze? How do you determine which type of startup aligns with your ambitions, risk appetite, and resources?

That’s exactly what we aim to clarify in this article. Consider this your comprehensive guide to understanding the seven main types of startups. Scalable ventures aim for global dominance, while lifestyle startups monetize passions.

7 Main Types Of Startup Businesses

Scalable Startups: The Heavy Hitters of the Startup World

Scalable startups are the rock stars of the business world, envisioned from the start to grow fast and disrupt existing markets – or create entirely new ones. Unlike other types of startups that may aim for slow, steady growth, scalable startups go all-in on aggressive expansion. The central aim is to skyrocket revenue and achieve an extraordinary return on investment (ROI).

Market research is non-negotiable for scalable startups; it’s the cornerstone upon which all strategies are built. The goal is to identify gaps in the market or create new markets altogether. Once they find a viable opportunity, scalable startups use substantial capital to fuel their growth. Venture capitalists often provide this capital, seeking a high return.

The people behind these startups are usually a different breed of entrepreneurs – innovators and visionaries with a desire to revolutionize an industry or solve a pressing societal issue. Facebook and Google are quintessential examples of scalable startups that changed the landscape of technology and culture. Mark Zuckerberg started Facebook in his college dorm room, but the company quickly blossomed into a social media behemoth. Google, on the other hand, redefined how we search and access information online.

Funding is a significant aspect of scalable startups. These companies often rely on venture capitalists for the capital necessary for rapid expansion, in terms of both manpower and technological resources. As the startup grows, the stakes get higher, but so do the rewards.

Large Company Startups: The Corporate Innovators

Unlike bootstrapped startups, large company startups benefit from corporate backing. They access capital, customers, and brand recognition through their parent company.

The primary purpose of these offshoot startups is usually to explore new markets, experiment with disruptive technologies, or directly compete with smaller, emerging competitors. Because they are funded and supported by the parent company, they typically don’t need to seek external funding. This financial security allows them more room for experimentation, often leading to innovations that smaller startups might find risky.

For example, Waymo, a subsidiary of Alphabet Inc. (Google’s parent company), has been making strides in the field of autonomous vehicles. While Alphabet has its hands in various projects, Waymo operates somewhat independently, focused solely on making self-driving cars a reality. Waymo benefits from Google’s vast data and technological prowess but also maintains a level of independence that allows it to innovate freely.

This model suits big firms aiming to diversify without risking current operations. For resource-rich executives, launching such a startup can ensure staying ahead.

Small Business Startups: The Community Pillars

Unlike scalable startups that aim for rapid growth and large company startups that leverage corporate backing, small business startups focus on longevity and community impact. The primary goal here is not to reinvent the wheel but to provide a stable, long-term business that serves a local or niche community. They usually operate in traditional sectors like retail, food services, and local trades and are often family-owned.

Capital for these startups typically comes from personal savings, bank loans, or community crowdfunding rather than venture capitalists. The objective is not to scale quickly but to build a sustainable business that can provide a stable income and possibly even get passed down through generations.

One such example is Baked by Melissa, a cupcake shop started in New York City. Melissa Ben-Ishay was fired from her advertising job and decided to turn her cupcake-making hobby into a full-time business. She didn’t aim for rapid scalability or technological innovation but focused on providing high-quality, unique cupcakes. Through word of mouth, community involvement, and a straightforward business model, Baked by Melissa now has multiple locations and has become a staple in the community.

Social Entrepreneurship Startups: Making a Difference

While most startup types focus on financial gain, social entrepreneurship startups have a different primary objective: making a positive impact on society. Whether tackling environmental issues, social inequalities, or public health, these startups aim to solve real-world problems while still maintaining a sustainable business model.

Funding for social entrepreneurship often comes from a mix of grants, impact investors, and crowdfunding. Traditional venture capital is less common in this space because the focus isn’t strictly on ROI; instead, success is measured by the scale and efficacy of the social impact.

A real-world example of a social entrepreneurship startup is TOMS Shoes. Founded by Blake Mycoskie, TOMS initiated the concept of “One for One,” where for every pair of shoes sold, another pair would be donated to a child in need. This business model has expanded to eyewear and coffee, providing sight-saving surgery and clean water, respectively. While TOMS is a for-profit company, its core mission revolves around social impact, setting it apart from traditional retail businesses.

Lifestyle Startups: Passion Turned Profession

Lifestyle startups stand apart from other startup types because they’re not necessarily looking to solve a widespread problem or achieve explosive growth. Instead, these startups are built around the lifestyle desires of the founders. These entrepreneurs aim to turn a passion or hobby into a full-time career, often leveraging social media platforms to share their journey, skills, or products with a like-minded audience.

Typically, these startups have more modest financial aims and are often bootstrapped or funded by a small circle of investors who believe in the founder’s vision. The goal is to maintain a work-life balance while still earning a reasonable income.

One prominent example is GoPro, started by Nick Woodman. Woodman loved surfing and felt that there was a gap in the market for affordable, high-quality cameras that could capture action shots. His passion for surfing and capturing the perfect wave led him to create GoPro. Initially focused on the surfing community, GoPro has now expanded and is popular among all types of lifestyle adventurers.

Buyable Startups: The Exit Strategy Entrepreneurs

The primary objective for buyable startups is to build a compelling product or service with the explicit intention of selling the business to a larger company. This type of startup is often technology-driven and aims for rapid development and growth to quickly attract the interest of potential buyers.

Since the focus is on a quick exit, these startups may emphasize innovation and market disruption over long-term sustainability. They’re often lean operations, aiming to showcase the potential for scalability and profitability rather than building a large team or extensive infrastructure.

Buyable startups often attract serial entrepreneurs. These individuals enjoy starting businesses but lean towards new projects over managing mature companies.This category also attracts investors looking for quick, lucrative returns, making venture capital a common funding source.

An example of a successful buyable startup is Instagram. Kevin Systrom and Mike Krieger founded Instagram as a simple photo-sharing app. Its rapid growth and massive engagement were impressive. Facebook noticed this momentum. They acquired the startup for roughly $1 billion only 18 months post-launch.

Hybrid Startups: The Best of Multiple Worlds

We’ve primarily focused on seven startup types, but hybrids are emerging, blending various elements. They resist straightforward classification, evolving over time or showcasing multiple characteristics initially.”

A hybrid startup often begins with a social entrepreneurship mission. However, they might later adopt scalable business models enticing venture capital. Some initially focus on community impact. But with innovative success, they can pivot into a sought-after tech startup.

The funding strategies for hybrid startups can be as diverse as their business models, ranging from bootstrapping and crowdfunding to venture capital and corporate investment. The key to success for a hybrid startup is flexibility. The founders need to be agile and responsive to opportunities and challenges, ready to pivot or scale as conditions demand.

A notable example of a hybrid startup is SpaceX, founded by Elon Musk. While primarily a scalable startup in the aerospace industry, it also incorporates elements of social entrepreneurship with its mission to make life multi-planetary. Additionally, it acts as a large company startup within the Tesla ecosystem, sharing resources and technology.

Wrapping Up

The startup world is a dynamic, ever-changing ecosystem where different types of businesses can thrive. From scalable startups aiming to revolutionize industries to small business startups focusing on community impact, the opportunities are vast and varied. Understanding these different types of startups can help you find the business model that aligns with your personal goals, skills, and values. As we’ve seen through real-world examples, success can come in many forms, driven by diverse approaches to entrepreneurship. Choose a startup type that aligns with your aspirations. It should also leverage your unique strengths.