Types of Enterprises

Types of Enterprises

Welcome to our discussion on the types of enterprises that are available to someone considering launching a startup. Not all startups are the same. There are many different reasons why someone might launch a startup, and there are many different ways to go about launching a startup company.

And as a result, there are a lot of different ways that we have, as entrepreneurship enthusiasts, of categorizing startups in different categories. In this guide, I’m going to give you a five-category technique to discuss different startup approaches here, but other ways of categorizing are just as valid.

So this is just a way of thinking through the reasons why someone might launch a startup, the resources that the startup needs to grow, and the approaches they might take to eventually exit that startup.

Related: Entrepreneurship in Established Firms

Source: Young Entrepreneurs Forum

Types of Enterprises

So there are five real startup types. Lifestyle startups, small businesses, high-growth companies, intrapreneurship ventures, and social ventures. Let’s go through each of those.

Types of Enterprises #1: Lifestyle Venture

So a lifestyle venture is something that’s run as a business, a hobby, or a supplemental source of income. People are doing lifestyle businesses because they enjoy what they’re doing, they find it satisfying, and they think, maybe I can make a little money out of doing this.

The funding here is usually fairly minimal, in that you don’t need to raise a lot of funds to make this startup type succeed. You’re usually doing this as a hobby in your home, outside of work, or outside of school.

You’re not planning on scaling this up, you’re not looking to hire more people. Sometimes you end up in this situation where it starts to grow, and you grow accidentally, but the goal originally is to run something small, not planning a big exit, not a lot of money. It’s a way of making some additional cash doing something you enjoy doing on the side of a regular job or other obligations you might have.

Types of Enterprises #2: Small Business

The other, and most common business type, is the small business. A small business is almost any kind of startup venture where the goal is not to achieve some sort of fast hyper road through the exit, to not do something just for fun, not to inside an existing company.

Most businesses across the world are small businesses. The goal of the small business is, in the words of Steve Blank, to feed the family. You want to be your boss, and you want to run a business that’s turning out some money.

Some of these can be very lucrative, some of them less so, but you can think about anything from a restaurant to a dry cleaner to a scrap metal yard. But the goal here is to start a business that is sustainable and doesn’t necessarily scale hugely.

You’re open to running a dry cleaning, but you may not want to run seven dry cleaners. It’s not a necessary goal to expand, and certainly not a goal to exit. And this kind of business is usually funded through loans, personal investment, or through family and friends money.

So the vast majority of these businesses do not want to grow. These make up, by far, the bulk of employers in most countries, and is the most common sort of business type. And their goal is to sustainably run it in the long term.

Types of Enterprises #3: Growth Startup

Then, there is what many of you I think viewing this course are interested in, which is the high growth startup, or the Silicon Valley-style startup.

So these startups, the goal is to grow very quickly to scale them up. You want to be the next Google, or Uber, or Facebook, or whatever, or be bought by one of these people. So the goal is, to grow quickly. Think about that rich versus king dilemma we discussed in a previous lecture. You either want to make a lot of money, be in control of your destiny, or some combination of those two.

So your goal is to grow very quickly. Usually, you’ll need venture capital or angel investment money to make this occur. Although, as you’ll see in the funding lectures, there’s a variety of choices to approach the funding of these kinds of ventures.

And you’re going to ideally exit through an initial public offering, so go public on the stock market, or through acquisition by, say, Google, Facebook, or Twitter, or something similar.

So this is the high-growth startup that we all hear about so often. There is a very small percentage of startups, so around 2% of startups receive venture funding, but the ones that we hear the most about, and a goal for a lot of people who are taking this course.

Types of Enterprises #4: Intrapreneurship Ventures

Another option for startup activities is to not leave your company at all. You can engage in intrapreneurship, a startup inside a larger organization where your goal is to develop something new or innovative, and help the company change or evolve. Usually, you’ll use internal company resources, so the risks are relatively low personally.

And sometimes the goal is to scale it quickly, sometimes the goal is to stay with a small group inside the organization. But your goal, eventually, is to have this idea be adapted into the larger firm or even spun off into its unit. But you’re looking to help build company success by building this venture inside the organization.

Types of Enterprises #5: Social Venture

And then, a final approach that you might want to consider as a startup is a social venture. So these are ventures whose primary goal is to accomplish some sort of social good. That could be a charitable thing, that could be some political or lobbying kind of effort, that could be an artistic or cultural effort. But the idea here is less to make money, and more to create some value for society that’s important to you.

Usually, the resources here are a little different. You’re looking for grants, you’re looking for volunteers, you’re looking for donations. And you’re not planning an exit, you’re hopefully building something sustainable for the long term.

The 4 Personality Types of Successful Entrepreneurs


So there are many types of businesses out there, and they differ across many dimensions, including the kind of goals you want to achieve, the resource you need to make those things happen, and where you can do these things.

So as we’ll talk about in some of the other guides, it’s much easier to launch a high-growth company in Silicon Valley than in South Dakota, but a cultural venture may do better in South Dakota than in Silicon Valley.

And they’re also different in how much time they use, and what resources you need to take into account. So when you take the lessons here on this platform, you’ll need to think about adapting them as needed.

So some of the things that apply to high-growth ventures, like how to raise venture capital, may not apply to a social venture. But some of the lessons are very universalizable, like how to think about the other of business.

Also Read: What Does a Typical Entrepreneur Look Like?

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