Why founders increasingly hate the word ‘startup’

Only two years ago, startup was the ‘in’ thing and friends who were launching their ventures were proudly declaring they were a ‘startup’. The mood seems to have changed dramatically since. What I often hear nowadays is: “what are you talking about? We are not a startup – we are a fintech venture” or something like that.

What happened to the term ‘startup’?

If you talk to some veteran investors in this region, you will get some clue. “Those who claim to be startups are so pretentious,” one of them told me recently. “I’d rather deal with founders who know exactly what they are doing, and not mentioning ‘startup’ at all.”

It may seem like an over-generalisation, but there’s a grain of truth in this. For example, my friends coming from China are often surprised with the easy life of a ‘startup’ in many places: “they stroll into work at 10am, leave at 6pm sharp. Send an email and wait for the other party to reply, and go on holidays five times a year.” This mindset is quite obvious if you visit some of the startup hubs around Block 71. Founders and their teams can be more focused on getting a good coffee, and organising big parties; rather than building their business.

Too much money in startups, too many spectacular failures

Until recently, it was not unusual to see ideas that made no sense raise a couple of million dollars. The market used to be focused on growth, and not trying to break-even or generate revenue. Founders and investors alike were focused on growth, and capturing market share. It is the complete opposite now, and this sentiment is only growing stronger day by day.

There have also been many spectacular failures in startups valued in excess of 100 million US dollars. Take for example our story about Bluegogo from earlier this week.

It is no wonder that people want to use the word ‘startup’ to describe themselves. Rather, they want to be perceived as a viable business, generating cashflow and having real customers.

Less appetite for massive cash burn, focus on sustainability

The first generation of startups in the Southeast Asian region – namely the ones funded by Rocket Internet – were notorious spenders. It was accepted as the way of doing business, and many put these first generation pioneers and trailblazers of the Southeast Asian internet business on a pedestal. The ability to invest massively into advertising became a sought-after talent, at least until recently.

When huge cash burns did not translate to increased market share for the startups and many eventually flopped and folded (a few, most notably Lazada, were purchased). Conservatism became a virtue overnight. Companies that branded themselves as startups, and who were known to spend big budget on advertising just to maintain unsustainable growth found it hard to raise money, as investors began seeking for sustainable growth. Matahari Mall was a good example – it rose fast to be the number one in the Indonesian market by burning a lot of marketing dollars but was unable to maintain the lead. It is until today – considered a massive failure.

It may be all about perception, but taking all this into account, what exactly does this say about a “startup mentality”?