Jason Fried, from 37signals, wrote a great post last week on Signal vs. Noise, titled Start a business, not a startup, in which he talks about the importance of handling a startup as the business it is supposed to be, and the obvious rule that any business needs to generate revenue to live on and grow.
From the moment they go live, startups are as real as any other business. They are governed by the same set of market forces and economic precepts that wrap around every other company, new or old.
At the atomic level, all businesses need to generate revenue to pay their bills, grow their business, and stay in business. The sooner they find themselves in the black, the better chance they’ll have to survive.
[…]
A poorly run startup is a poorly run business. A wonderfully run startup is a wonderfully run business. I don’t believe there are many great startups that are bad businesses. Maybe less than 1%. If the business is bad the startup is bad. A great idea, maybe, but a great business, no.
So if you start something up, start a business, don’t start a startup.
— Jason Fried; Start a business, not a startup
I think this is very important in an age where the speed and ease of getting things off the ground makes many people overlook or delay the very crucial business planning part of building their startup; while some others have a business goal as simple as being acquired by X or Y of the giant companies.
Some of what’s going on nowadays reminds me a bit of the first internet bubble, when everyone launched startups covering every imaginable idea with no business model whatsoever, aiming to cash out with an IPO. Now it’s no longer IPOs they’re after but acquisitions by bigger players. That will come to an end too, as those big players start considering how they are going to fit those startups into their bigger picture and make more money out of them.
Another thing to consider is that even if you’re after someone acquiring your startup, you’ll certainly have better chances of getting a better deal if your startup actually generates money and will bring an extra financial value to them.