As the owner of what could be called, by popular definition, a "startup company", I read a lot of blogs written by a lot of smart folks about the art of running a business. Ever since the dot com bubble a decade a go, Internet software companies have been referred to rather glamorously as "startups" without much regard for what that means. EditMe, for example, has been around since 2003 and has been profitable for several years. In my mind, that doesn't make it a startup. But calling it a "company" is so boring, right?

Wikipedia has a page devoted to the term, of course, and puts a boundary on it: "A company may cease to be a startup as it passes various milestones, such as becoming profitable, or becoming publicly traded in an IPO, or ceasing to exist as an independent entity via a merger or acquisition. Companies may also fail and cease to operate altogether."

That seems like a perfectly reasonable line of demarcation, and it means that most of what tech bloggers and pundits are calling startups, aren't.

Given the true costs of starting a web-based software company, the first of these milestones, profitability, should come very quickly. If it doesn't, the founders should go back to the drawing board - fast. IPOs are not in fashion any more, and the M&A strategy can be a real crap shoot.

Steve Blank, a business blogger, recently posted about this, and makes a great point: "a startup is an organization formed to search for a repeatable and scalable business model".

Using that as a base for definition, a company ceases to be a startup as soon as it has identified and implemented a repeatable and scalable business model (or runs out of money trying).

Profitability is really the point of doing business in the first place, and it seems to me that identification of a theoretically profitable business model is step one of forming a business. Exceedingly rare occurrences of companies like Twitter who just run with an idea and throw the concept of a business model to the wind should not be used as an excuse for doing the same. (Twitter's long term profitability is still an open question.)

I like to think of the business model that Steve Blank talks about in his post as the "cash engine" at the center of every business; the core set of tasks, processes, inputs and outputs that generate profit. At the end of the day, a company is as valuable as that model is successful. Period.

Why am I posting about this on the EditMe blog? EditMe is working on a new product to help small business owners (who may very well like to call themselves startups) define, document, measure and improve their business model. Interested? Stay tuned!