What Is a Startup? Definition, Traits, and Examples

Key Takeaways

• A startup is a new business built for rapid growth while it is still testing how to reach customers and develop a repeatable, scalable business model.
• Common startup characteristics include scalability, innovation, adaptability, and operating under uncertainty. Outside investment is common, but it is not required for a business to be considered a startup.
• Startup funding may progress through pre-seed, seed, Series A, and later rounds, but there is no fixed sequence. Some startups remain bootstrapped or skip funding stages entirely.
• Hospitality companies such as Airbnb, Booking.com, and OYO show how startup models can change established industries, while César Ritz provides an earlier example of entrepreneurial thinking in hospitality.

According to Forbes, about 21.5% of U.S. startups close within their first year, while roughly 65% do not make it to the ten-year mark. Those figures put the early excitement around a new venture into perspective: getting started matters, but so does knowing how to develop an idea once it meets the realities of the market.

That distinction is especially relevant for students interested in entrepreneurship. At César Ritz Colleges, the Rethink. Refine. Realize. approach reflects the idea that a business concept should be questioned and developed before it is put into practice. It provides a useful starting point for understanding what it takes to move beyond launching a business and build one with stronger foundations.

What Is a Startup?

A startup is a new business created with the intention of growing quickly and reaching a much larger market. Unlike a traditional small business, it is usually still working out exactly how it will make money, reach customers, and grow efficiently.

That idea appears in two widely used definitions of startups. Entrepreneur and investor Paul Graham argues that growth is the defining feature of a startup: a company is built as a startup when it is designed to grow fast. Steve Blank focuses on what happens before that growth, describing a startup as an organization searching for a business model that can be repeated and scaled.

This is what separates a startup from many other newly opened businesses. A restaurant opened to serve one local community may be a new business without being a startup. A company developing a restaurant concept that could be repeated across many locations may fit the startup model more closely. Outside investment is common because rapid expansion requires capital, but receiving investment is not what makes a company a startup.

Startup vs. Small Business

The most common confusion around the term startup is whether every new small business qualifies. It does not. The two are structurally different in what they aim for, how they operate, and how they are funded. The main differences are in:

• Growth ambition: startups are built to grow rapidly beyond their current size, while small businesses are built to be stable and profitable at their current size.
• Funding source: startups typically raise outside capital, such as angel investment or venture capital, to fund growth before profitability, while small businesses typically fund themselves through founder savings, loans, and revenue.
• Business model status: startups are still searching for a repeatable and scalable business model, while small businesses operate on a proven model, such as a restaurant or a service business.
• Risk profile: startups take on high risk in exchange for the possibility of outsized growth, while small businesses accept more modest returns in exchange for lower risk.
• Geographic scope: startups typically aim for national, international, or online-scalable markets, while small businesses often serve a local or regional customer base.
• End goal: startups aim for an eventual exit through acquisition, IPO, or growth into a large company, while small businesses aim for sustainable profitability over the long term, sometimes across generations.

Key Characteristics of a Startup

There are several characteristics that appear consistently in widely used startup frameworks, including the work of entrepreneurs Paul Graham, Steve Blank, and Eric Ries. Growth is central, but startups are also distinguished by the fact that much of the business is still being tested rather than simply operated.

The key characteristics of a startup are:

Scalability

A scalable business can grow without its costs increasing at the same rate as its revenue or customer base. This is one reason startups are often built differently from conventional small businesses.

A hotel, for example, has a physical limit on how many guests it can accommodate. Serving substantially more guests may require another property, additional rooms, and more staff. Airbnb operates differently. Its marketplace connects hosts and guests, allowing accommodation supply to increase as more hosts join the platform rather than requiring Airbnb to own and build each property itself. Airbnb describes its business as a global marketplace connecting hosts with guests across more than 220 countries and regions.

That does not mean every scalable company will become a successful startup. Paul Graham's distinction is about intent and potential: startups are designed to pursue rapid growth, while many other new businesses are created to serve a more defined market at a sustainable size.

Innovation

Startups also tend to be built around a new way of solving a problem or serving a market. That does not require inventing a completely new technology. The innovation may lie in the product itself or in the way the business reaches customers and delivers its service.

Hospitality provides good examples. Airbnb built a marketplace that made it possible for individuals to offer their own homes and spaces to travelers at a global scale. OYO took a different approach, building a network of independently operated properties supported by common technology, operating systems, and brand standards. OYO's own history shows how the company expanded from its first property in 2013 to 100 cities and more than 10,000 rooms by 2015.

Innovation, therefore, does not have to mean creating something that has never existed before. For a startup, it often means finding a different model that has the potential to work across a much larger market.

Operating under uncertainty

A startup begins before all the important questions about the business have been answered. Founders may have an idea and an initial product, but they are still testing who will use it, how customers will respond, and whether the business model can support continued growth.

Eric Ries describes a startup as an organization creating a new product or service under conditions of "extreme uncertainty." Steve Blank makes a similar distinction between a startup and an established company: an established company executes a business model it already understands, while a startup is still searching for one that can be repeated and scaled.

Airbnb's beginnings illustrate that uncertainty clearly. Its founders first rented airbeds in their San Francisco apartment when hotels were full for a design conference. Their own account of the company's beginnings describes how people questioned whether strangers would be willing to stay in other people's homes. The founders, therefore, had to establish that the behavior behind the idea could work before the model could expand.

Adaptability

Because so much remains untested, startups need to respond quickly to what they learn. An assumption about customers, pricing, or the product may prove wrong once the business enters the market. The next step is not necessarily to abandon the company, but to change the parts of the model that are not working.

Steve Blank describes these changes as iterations and pivots driven by what founders learn from testing their assumptions with customers. In this view, adaptability is closely connected to the startup's search for a workable business model.

This is also an important difference between searching and operating. An established company generally has more evidence about who its customers are and how its business makes money. A startup is still building that evidence, so its early decisions are more likely to change as new information becomes available.

The Startup Lifecycle and Funding Stages

Startup development is often described through funding stages, but companies do not all follow the same sequence. Some are bootstrapped and never raise venture capital. Others remain at one stage for years or move through several funding rounds relatively quickly. These stages include the following:

• Ideation and pre-seed: At the earliest stage, founders define the problem they want to solve and begin testing whether there is a viable business behind the idea. They may build a prototype or early version of the product. Funding, when needed, often comes from the founders themselves, friends and family, angel investors, or pre-seed funds.
• Seed stage: The business moves beyond the initial idea and begins testing its product with real customers. Seed funding may support product development, early hiring, market validation, and customer acquisition. At this point, the startup is looking for evidence that there is genuine demand and that its business model has the potential to work.
• Series A: By the time a company raises a Series A round, investors generally expect more evidence of traction than they would at seed stage. The company may have an established user base, growing revenue, or other indicators that its model is gaining ground. Funding is then used to strengthen the product and expand the business. Product-market fit is important at this stage, but it should not be treated as a milestone that every startup reaches at exactly the same point.
• Series B, Series C, and later rounds: Later-stage funding generally supports a business that has already demonstrated stronger demand and is preparing for larger-scale expansion. Capital may be used to enter new markets, increase operational capacity, or develop additional products. As the company becomes more established, the emphasis gradually moves from searching for a workable model toward executing and expanding one that has already produced evidence of demand.
• Exit or maturity: Some startups eventually reach an IPO or are acquired, while others continue operating as private companies. An exit is therefore one possible outcome rather than a required final stage. Airbnb followed the public-market route: after beginning with three guests in a San Francisco apartment in 2007, the company completed its IPO and began trading on Nasdaq in December 2020.

The important point is that these stages describe a common pattern, not a set of deadlines. A startup may raise several rounds, remain bootstrapped, change its model before raising again, or never reach the later stages at all. What changes as the company develops is the amount of evidence it has about its customers and business model, and therefore how much of its work is still focused on searching rather than executing.

Notable Startup Examples

Startup history is often told through technology companies, but hospitality and travel offer some of the clearest examples of how a new business model can change an established industry.

César Ritz and the Ritz Paris (1898)

César Ritz was not a startup founder in the modern sense, but his approach to hospitality reflects the kind of entrepreneurial thinking associated with startups today.

When he opened the Ritz Paris in 1898, the hotel introduced standards that were unusual for the period, including private bathrooms in guest rooms and electricity on every floor. His influence is particularly relevant at César Ritz Colleges, where entrepreneurship and innovation remain part of the school's approach to hospitality business education.

Airbnb (2008)

Airbnb began when Brian Chesky and Joe Gebbia hosted paying guests on air mattresses in their San Francisco apartment. The first version of Airbed & Breakfast formally launched in 2008, initially attracting only a handful of bookings before the model began to gain traction. The company showed that accommodation supply did not have to come only from hotels or professional property operators. By creating a platform connecting individual hosts with travelers, Airbnb developed a business model that could expand as more people joined both sides of the marketplace.

Booking.com (1996)

Booking.com began in Amsterdam in 1996 as a small Dutch startup and grew into a major global digital travel company. Its model gave accommodation providers a way to reach travelers online while allowing customers to compare and reserve properties through one platform. Booking Holdings now describes it as one of the world's largest travel marketplaces. Its development shows how a startup can grow by making an existing part of hospitality, booking accommodation, easier to access and repeat across markets.

OYO (2013)

OYO approached hospitality from another direction. Its first OYO property opened in Gurugram, India, in 2013, followed by rapid expansion to 100 cities and more than 10,000 rooms by 2015. Rather than owning every hotel itself, OYO worked with independent properties and provided technology, branding, and operating systems intended to create greater consistency across a fragmented budget-hotel market.

These examples are especially relevant to hospitality students because they show that entrepreneurship in the sector does not always mean opening a traditional hotel or restaurant. It can also involve changing how accommodation is distributed, how independent properties operate, or how guests interact with hospitality businesses. César Ritz Colleges reflects that broader view of entrepreneurship in its Hospitality Business Management curriculum, which includes Innovation: From Creativity to Entrepreneurship and practical opportunities connected to business creation.

Common Challenges Startups Face

Starting a company does not guarantee that it will survive long enough to scale.  The reasons for failure differ from company to company, but several problems appear repeatedly:

• Weak product-market fit: A startup may build a product that attracts some early interest without finding enough sustained customer demand to support the business. In CB Insights' 2026 analysis of failed VC-backed companies, poor product-market fit appeared in 43% of cases where a cause could be identified.
• Running out of capital: Startups often spend money before the business generates enough revenue to support itself. CB Insights found capital exhaustion in 70% of the failures it examined, although it notes that running out of money is often the final result of deeper business problems rather than the original cause.
• Unsustainable economics: Growth does not help if acquiring or serving each additional customer costs too much. A startup needs a model in which expansion has a realistic chance of producing sustainable returns rather than simply increasing losses. CB Insights identified unsustainable unit economics in 19% of the failures in its 2026 analysis.
• Market and regulatory conditions: Timing, economic conditions, and regulation can change the prospects of a young company quickly. This is particularly relevant in hospitality, where accommodation businesses may face local licensing rules, short-term rental restrictions, property costs, and seasonal demand. César Ritz Colleges similarly emphasizes the importance of testing hospitality concepts against factors such as seasonality and local regulation before committing substantial resources.

Building the Leadership Skills Behind Successful Startups

Structured entrepreneurship education is one of the most reliable environments for developing startup founding capability. Coursework builds the theoretical foundation, faculty and peers challenge business ideas before real money is at stake, and an international student body provides the market perspective global hospitality startups need.

For students preparing to launch or lead a startup in the hospitality industry, the CRCS offers the Bachelor of Science in Hospitality Business Management, a program combining two paid global internships with structured entrepreneurship coursework and hands-on hospitality business training. For current and aspiring founders building the senior leadership skills that carry a startup from founding through scale, the Master of Science in Leadership builds the strategic and operational foundation that successful startup leaders rely on. Both programs are delivered through Swiss Federal Accreditation and reflect the Innovation Philosophy of the CRCS: Rethink. Refine. Realize.

Frequently Asked Questions

How old can a company be and still be considered a startup?

There is no fixed age limit. A company stops being a startup when it reaches a proven, repeatable business model and stable growth, which can happen in two years or take a decade, depending on the industry and market.

Do you need venture capital to start a startup?

No. Many startups bootstrap using founder savings and early revenue before raising outside capital, and some never raise external funding at all, though venture capital can accelerate growth once product-market fit is established.

What is the difference between a startup and a scale-up?

A startup is still searching for a repeatable and scalable business model, while a scale-up has found that model and is focused on growing it efficiently, typically with more structured operations and a larger team.

What are the odds of a startup succeeding?

Estimates vary widely by source and definition, but widely cited figures suggest that roughly 1 in 10 startups reach long-term success, with product-market fit and sufficient funding among the strongest predictors of survival.