The 6 Types of Startups: Which One Are You Building?

When we think of startups, we often envision a single type of company—a tech startup aiming to become the next Facebook or Google. However, not all startups follow the same path, nor do they have the same goals. There are actually six distinct types of startups, each with its own characteristics, financial needs, and growth strategies. Understanding which type of startup you’re building is critical for aligning your efforts with your long-term vision.

Let’s dive into the 6 types of startups and explore what makes each unique.

1. Lifestyle Startups: Work to Live Their Passion

Lifestyle startups are built by entrepreneurs who are passionate about what they do and want to create a business that supports their lifestyle. These entrepreneurs are often driven by personal satisfaction rather than financial gain. For example, a surfer who teaches surfing lessons to fund their beach lifestyle is a classic example of a lifestyle startup. The goal is to work to live, not live to work.

• Main Goal: Support personal passions and maintain a comfortable lifestyle.

• Funding: Usually self-funded or supported by small, local revenue streams.

• Growth Focus: Not necessarily aiming for scale; focused on sustainability and personal fulfillment.

  
  

2. Small-Business Startups: Work to Feed the Family

Small-business startups make up the vast majority of new businesses. These are the local grocery stores, plumbers, salons, and consultancies that aim to provide for the entrepreneur’s family. Most small-business owners have no intention of scaling or selling; instead, they focus on creating steady income streams that support their personal and family needs.

• Main Goal: Provide for the family and sustain the business.

• Funding: Typically bootstrapped or funded through family loans and small business loans.

• Growth Focus: Focused on local community and sustainable income, with limited scaling ambitions.

3. Scalable Startups: Born to Be Big

Scalable startups are what most people think of when they hear the word "startup." These companies are designed to grow quickly, attract venture capital, and potentially change the world. Think of companies like Facebook, Uber, or Airbnb—they started with a vision for global scale. These startups need large amounts of capital to fund rapid growth and attract investors who are willing to take big risks for big rewards.

• Main Goal: Disrupt markets and scale globally.

• Funding: Venture capital and private equity are the main sources of funding.

• Growth Focus: Rapid growth through scalable business models, aiming for IPOs or acquisitions.

4. Buyable Startups: Acquisition Targets

Some startups are built with the intention of being sold to a larger company. These buyable startups often focus on tech products, apps, or digital services that solve a specific problem. The goal isn’t necessarily to grow into a billion-dollar company but to develop a solution that larger companies are willing to buy. Many of these startups are sold for $5 million to $50 million to tech giants looking to expand their portfolio.

• Main Goal: Build a product or service that is attractive for acquisition.

• Funding: Often funded by angel investors or small venture capital.

• Growth Focus: Focused on achieving product-market fit and becoming an acquisition target.

  
  

5. Social Startups: Driven to Make a Difference

Social startups are driven by a desire to solve social, environmental, or community issues. These entrepreneurs are passionate about making the world a better place, and while they need to generate revenue to sustain their operations, profit is not their primary motivation. Social startups may operate as nonprofits, for-profits, or hybrid models, and their success is measured by the impact they make, not just financial returns.

• Main Goal: Create positive social or environmental impact.

• Funding: Typically funded through grants, donations, or social investors.

• Growth Focus: Focused on scaling impact, not just profits.

  
  

6. Large-Company Startups: Innovate or Evaporate

Even large corporations need to innovate. Large-company startups are typically spin-offs or innovation arms within established companies. These startups help large businesses adapt to changing markets and technologies by creating new products, services, or even entirely new business models. As markets evolve, large companies either innovate through these startups or risk becoming obsolete.

• Main Goal: Innovate to stay competitive in the market.

• Funding: Supported by the parent company’s resources.

• Growth Focus: Focused on launching new products and adapting to market shifts to ensure the company’s long-term survival.

Which Startup Type Are You Building?

Understanding which type of startup you’re building helps guide your decisions regarding funding, growth strategy, and business model. For example:

• If you’re launching a scalable startup, your focus should be on finding investors who believe in your vision and can fund your growth.

• If you’re building a small business, your goal is sustainability, so finding steady customers and maintaining profitability is key.

• If you’re creating a buyable startup, you’ll want to focus on perfecting your product and becoming an attractive acquisition target.

Each type of startup requires a unique approach, and knowing where you fit in the entrepreneurial landscape is crucial for long-term success.

Final Thoughts

No matter what type of startup you’re building, the key is to align your goals, resources, and strategies with your long-term vision. Each type of startup has its challenges and opportunities, and by understanding your specific path, you can make informed decisions that lead to success.

Which startup type best describes your business? Share your thoughts in the comments below!