Non-big IT vendors: Trying to understand where startups fit in tech

Part one: Who are you calling an upstart?

Sysadmin blog Are startups to be avoided? You'll get different answers depending on who you talk to, but the arguments have relevance for the virtualization and storage markets as, today, most of the innovation is occurring with startups.

I've been a champion of working with startups for some time now. I don't advocate engaging with startups indiscriminately, of course, but I don't buy the spectacularly risk-averse view of tech that says a company is only worthwhile just before it goes out of business for being a legacy vendor either.

While trusting startups has always been a bit of a hot topic in tech, it seems to be a much bigger deal of late than it has been in some time. I believe this is because the reach of tech is expanding. Virtually every company in the developed world utterly dependent on high tech. Tech is integrating into every nook and cranny, monitoring, processing and automating jobs in every walk of life.

Some of this sense of the growing importance of startups also stems from the growing number of companies referred to as "startups" within the industry. The term is somewhat fluid. Where people consider "startup" to be derogatory, it is used with abandon to refer to any company not at least as old as the competing vendor casting aspersions.

Startup is also a term adopted by companies seeking to wield the concept of being a "disruptor" like a cudgel. They want to be seen as young, hip and brash. Especially if they are sharing economy startups whose business plan is to violate labour laws until their competition are driven out of business, then form part of a new oligopoly and drive prices through the roof.

What is a startup?

What is a startup? Ask 10 people this question and you'll get at least 11 different answers. In tech, there's a tradition for startups that is different than in many other sectors. In tech, you start up a company, burn through venture capital and then either go bust, get bought or IPO. Shortly thereafter you bail out to do it all over again.

Tech worships at the altar of the "serial entrepreneur". We even have names for companies in various stages of the process that, in almost any other sector, would seem insane. It is, for example, perfectly normal to be a "pre-revenue" startup in tech. You can even spend a decade or more being "pre-profit". We talk about "exit strategies" in relation to the "exit track" that a startup is on. Terms like "keystone customer" and "minimum viable product" are bandied about as though they're normal. The tech startup world is really, really weird.

In my hometown a "startup" is any company formed since the last bust. Our economy is hugely boom and bust driven, and you don't know how reliable a company is until after it's been through a bust. Companies tend to fall into two categories: those formed by an individual to get them to retirement, and family businesses.

Where I'm from, a pre-profit 7 year old company with a multi-billion-dollar valuation burning venture capital at mind-boggling rates would not be considered a startup. Despite this, one of tech's darling startups, Nutanix, fits this description exactly. SimpliVity, Scale Computing, Tintri; without looking beyond the storage segment of tech we can identify oodles of companies regularly called "startups" that, outside of tech's bizarre echo chamber, very few people would accept as still being a startup.

Risk profile

Risk acceptance and perceived risk seem to play at least as big a role in our designation of vendors as startups as does their position on the venture capital roller coaster. Technologists are deeply risk averse by nature, with relatively stringent requirements for a technology or vendor to be considered "proven".

It's perfectly normal, for example, for an electrical company to be considered as not a startup after operating for only a few years. A master electrician starting their own firm is perfectly normal. As is one started by a couple of journeymen electricians. They do the job, they get paid, end of story.

On the more complicated side, we have drilling companies. Lots of heavy equipment, a diversity of jobs required, and – here in Alberta at least – you tend to need experience in order to not die. Drilling usually means up north, and when you go too much farther north than Edmonton, there are all sorts of things (from bears to the environment) that seem to want to kill you. Even here, you generally don't hear of 7 year old companies referred to as startups.

In an attempt to make sense of all of this, I am seeking feedback from you, the reader. What do you consider to be a startup in tech? What factors are part of your designation of a company as a startup?

Do you buy from startups? Why or why not? What has the experience been like? Please drop me a line with your thoughts here.

We may never arrive at a universally accepted definition for startup, but it would help to understand why different people choose to identify vendors differently. And why they choose to buy from them – or not – based on that designation as a startup. ®

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