Types of Startups: Scalable, Lifestyle, Social and Corporate Ventures

The word "startup" covers very different ventures. A founder opening a bakery, a team building software for a venture round, a nonprofit-minded group tackling a social problem and a division inside a large company launching a new product are all starting something, but they want different things and need different support. The most cited way to sort them is Steve Blank's list of six types of startups: lifestyle, small business, scalable, buyable, large company and social.

That list sorts startups by what the founders are trying to achieve. It's not the only useful lens. You can also sort by business model (a marketplace behaves nothing like a hardware company) and by how the venture is funded. This article covers all three, and ends with a table that puts the types side by side.

The point of the exercise isn't labeling for its own sake. Mixing types up causes real trouble. A founder who wants a comfortable business but takes venture money signs up for expectations they don't share. A corporate team run like a garage startup runs into the parent's rules. Knowing which type you're building makes most later decisions easier.

Lens 1: Steve Blank's six types of startups

Blank, the entrepreneur and Stanford lecturer behind the customer development method, laid out the six types in an essay on why governments don't get startups. His argument there was that policymakers treat all entrepreneurship as one thing, when the types need different ecosystems. The same essay is the source for the short phrases quoted below.

He opens the essay's list with the two that aren't aiming at big outcomes, and then moves to the four that are.

Lifestyle startups: "work to live their passion"

A lifestyle startup exists so the founder can do what they love and stay independent of an employer. Blank's examples are people who build a living around a passion, such as surfing, coding or design. Growth is fine, but it isn't the point. The point is the life the business supports.

These ventures are often one-person or very small, funded by the founder's savings or early revenue. Because nobody is chasing a giant exit, they rarely need outside investors.

Small business startups: "work to feed the family"

Small businesses are the corner shops and trades: grocery stores, hair salons, bakers, electricians. Blank says these make up the majority of entrepreneurs in the United States. They hire locally and run on personal savings and bank loans rather than venture capital. The owner's goal is a steady income, and the business is profitable enough to deliver it.

There's nothing second-class about this type. It's simply a different goal from the one the rest of this series usually describes. The distinction between the two is covered in depth in startup vs small business.

Scalable startups: "born to be big"

This is the type most people picture when they hear "startup." Founders believe their idea can change a market and grow into a large company. Blank's examples are Google, Facebook and Twitter. Unlike a small business owner, they aim at equity value and an eventual acquisition or public listing.

Scalable startups spend their early years searching for a business model that repeats and grows, which is the same idea as Blank's definition of a startup as an organization formed to search for a repeatable and scalable business model. That search is expensive and uncertain, so these companies usually rely on risk capital from investors. Paul Graham's description fits the type well: a startup is a company designed to grow fast.

Most of the frameworks about stages, funding rounds and product-market fit were built with this type in mind. If you want the full journey, start with the stages of a startup.

Buyable startups: "born to flip"

Buyable startups are built to be acquired. Blank describes web and mobile companies founded with the intent of selling to a larger company, at prices in the range of roughly $5 million to $50 million, made possible by lower development costs and the availability of angel funding. The team builds something a bigger player would rather buy than build, and the exit is the plan from day one.

The risk is dependency. If no buyer wants the product, the company doesn't have a fallback business, because it was never designed to stand on its own.

Large company startups: "innovate or evaporate"

Established companies launch new products for new customers because technology shifts or competitors are pressuring their core business. Blank notes that these efforts often struggle against the organization's own culture, which is built to execute a known model, not search for a new one.

This type shows up under many names: an innovation lab, an internal venture unit, a corporate accelerator, or a spin-out. Some large firms back outside startups instead of building inside, which is the logic of corporate venture capital. The idea of a larger company getting caught by a smaller challenger is explained in disruptive innovation, and it's the usual motivation behind this whole category.

Social startups: "driven to make a difference"

Blank describes social entrepreneurs as every bit as ambitious as other founders, but their objective is societal impact, not market share or personal wealth. The legal shape varies. A social startup can be a nonprofit, a for-profit or a hybrid. What defines it is that the mission comes first and the financial model exists to serve the mission.

Funding looks different too. Grants, donations, impact investors and earned revenue often mix together, and success is measured by outcomes for the people served as well as by revenue.

How the six types differ

Lens 2: Classification by business model

Blank's list tells you why a startup exists. A second lens tells you how it makes money, and this one matters a great deal for the day-to-day work. The same scalable-startup ambition plays out very differently in each of these.

• B2B SaaS. Subscription software sold to businesses. Revenue is recurring, so retention and expansion drive the economics. Because SaaS is the most common model in this series, many other articles go deep on it.
• Marketplace. The company connects buyers and sellers and takes a cut or fee. The hard part is attracting both sides at once. See the marketplace business model.
• Platform. Others build products, services or communities on top of what the company provides, and value grows with participation. See the platform business model.
• Hardware. Physical products bring manufacturing, inventory and longer development cycles, so cash needs are higher and mistakes cost more. See the hardware startup business model.
• Open source. The core software is free to use and the company earns from services, hosting or paid features. See the open source business model.
• Productized service. A service sold as a fixed-scope, fixed-price package, which can start with almost no capital. See productized service.
• B2B2C. The company sells through a business partner to reach that partner's consumers. See the B2B2C business model.

These models cut across Blank's types. A lifestyle founder might run a productized service. A scalable startup might build a marketplace or a platform. A large company might launch a new SaaS product. So the two lenses answer different questions, and it helps to answer both. The lean startup method is useful whichever model you pick, because every one of them starts with unproven assumptions about customers.

Lens 3: Classification by funding path

A third, simpler grouping looks at where the money comes from. This isn't a formal framework, just a plain description of the common routes:

The funding path and the goal have to match. Venture investors expect a few of their companies to grow very large, so a business that's perfectly healthy at a modest size can still be a poor fit for that kind of money. The trade-offs between self-funding and outside capital are covered in bootstrapped vs venture-backed startups.

How to tell which type you're building

Ask these questions, and be honest about the answers:

1. What does a good outcome look like in ten years? A comfortable income, a sale, a public company, a measurable change in the world? The answer points straight at a type.
2. How much control do you want to keep? Outside investors and parent companies come with expectations, and lifestyle and small business founders usually want to avoid them.
3. How big is the market, and does the product need to reach all of it? Scalable ventures need a large market. A small business can thrive in a small one.
4. Who's paying for the search? If you don't yet know your customer or model, someone has to fund the learning period. Savings, investors and corporate budgets each set different clocks.
5. Is the mission the product or the marketing? For social ventures, the mission determines every trade-off. For others, it's a nice extra.

You can change types, but it's a real decision, not a quiet drift. A lifestyle business that decides to raise venture money is becoming a different kind of company, with a different pace and different expectations.

Common mistakes when picking a type

• Treating "startup" as one thing. Advice from a venture-backed founder doesn't automatically apply to a bakery owner, and vice versa.
• Taking money that doesn't match the goal. The mismatch usually shows up when the investor expects growth the founder never planned.
• Running a corporate venture like a garage startup, or like a business unit. The first ignores the parent's constraints. The second kills the search for a new model.
• Calling every small business a startup, or every startup scalable. Many ventures never need to scale, and that's fine.
• Confusing the business model with the type. SaaS, marketplace and hardware describe how you earn, not why you exist.

Key Facts: Types of Startups

• Steve Blank groups startups into six types: lifestyle, small business, scalable, buyable, large company and social (Blank, 2011).
• Blank says small business startups make up the majority of entrepreneurs in the US and typically rely on savings and bank loans, not venture capital.
• Scalable startups aim for equity value and a large exit, and usually need risk capital to search for a repeatable business model.
• Blank defines a startup as an organization formed to search for a repeatable and scalable business model.
• Paul Graham defines a startup as a company designed to grow fast.
• Business model (marketplace, platform, SaaS, hardware) and funding path are separate lenses that cut across the six types.

Related reading

• What is a startup?
• Startup vs small business
• Bootstrapped vs venture-backed startups