How does one define a startup?

The best definition I've heard of a startup is a business that doesn't know:

  1. Who its customers are.
  2. What it's selling.
  3. How to make money.

Aside from being punchy in its absurdity, it also explains other good startup definitions, eg. the Lean Startup's "A startup is a temporary organization designed to search for a repeatable and scalable business model" or Paul Graham's "A startup is a business designed to grow really fast." What is it searching for? The answers to those 3 questions. Why is it temporary? Because it runs out of money if it can't find the answers to these questions. What happens when it finds them? It grows really fast.

The other thing I like about this definition is that it emphasizes that startups are meant to fill a previously-undiscovered hole in the marketplace. Is a McDonalds franchise a startup? No - it knows exactly who its customers are, what it's selling, and how to make money. Is a niche e-commerce shop a startup? No - it knows exactly who its customers are, what it's selling, and how to make money. Was Facebook a startup? Yes - it was unclear what it was selling or how to make money when they started (they had a pretty good idea that their customers would be local advertisers, though). Was YCombinator? Yes - they knew who their customers were and how to make money, but hadn't quite nailed down what they were selling. Was VMWare? Yes - they knew what they were selling and how to make money, but weren't clear who their customers would be. Are these 3 companies startups now? No - they've found the answers to all 3 questions, and now have a scalable, repeatable business model. Businesses like Stripe and AirBnB are also not startups anymore, but arguably Uber still is, because they haven't yet figured out how to consistently make money.

And it makes clear what you should be doing when founding a startup (trying to find the answers to these 3 questions), why people choose not to found startups (if you don't find these answers, you've wasted millions of dollars and years of your life), when a company graduates into a regular business (when they've found answers to these 3 questions), why startups grow so quickly (because they're entering effectively virgin business territory, they can capture the whole market without resistance once they find a business model that works), why they often seem absurd to critics (because they are), and why the rewards are so high (because the risks are too).

Startup is a small giant, or a child giant. They are defined by the market size. Small businesses usually have a local market (street/city). The startup market is global.