At StartupBlink, we evaluate startup ecosystems around the world, with a close focus on the quantity and quality of startups. To compare locations fairly, we need a precise definition of what a “startup” is, and what it isn’t. The word has entered everyday language thanks to globally successful tech companies. It can be inspiring (garage to global) and polarizing (questions around Big Tech). Clear criteria help cut through the noise.
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Defining “startup”
A startup is a young, innovative company built to scale. Innovation can be technological or a new business model that is clearly better than what exists. Scalability means the economics allow rapid growth without costs rising one-for-one with revenue. Startups operate under uncertainty, test quickly, and aim for impact beyond a single neighborhood or city. Funding sources do not define them; innovation, scalability, and intent to grow do.
When assessing companies for inclusion on our map, we look for real distinctiveness, strong product and user experience, and evidence that the solution can serve national or international markets, not just a local client base. A mobile app can be relevant when it is the natural interface to the product. We value early traction and clear plans for expansion. Investor backing from angels or VCs can validate the growth path, but bootstrapped companies qualify when their metrics show momentum. We also apply pragmatic flexibility in developing markets, where teams can prove ambition and scalability even if early signals differ. Country-specific domains are acceptable; we simply look for signs of global ambition alongside them.
The 4 Key Characteristics of Startups
Startups share a few defining traits that separate them from traditional small businesses. These characteristics shape how they operate, scale, and respond to uncertainty, and they explain why some teams break out while others stall. Below are the core elements that consistently signal a true startup.
1. Small Size, Big Impact
Emerging startups usually begin their journey with a small team working on a minimum viable product (MVP) or an initial prototype to test whether their idea offers real value to users and has the potential to scale. At this stage, the goal is simple: validate assumptions, understand the market, and prove that the solution solves a meaningful problem. Only after showing signs of traction, even small ones, can a startup attract additional customers, investors, and partners to support its next phase of growth.
It is widely accepted that an early-stage startup is typically a small business in terms of team size. However, being small does not automatically make a company a startup. The defining difference is the intention and ability to scale. Startups aim to build products or services that can reach large markets, grow rapidly, and create disproportionate impact compared to their size. To achieve this, startup teams must remain extremely flexible, iterate quickly, and adapt faster than traditional SMEs. This allows them to respond to technological shifts, competitive pressure, unexpected failures, and new opportunities with speed, a characteristic that continues to differentiate successful startups in today’s environment.
2. High Risk of Failure
Startups operate under a high risk of failure, largely because they begin with limited resources, untested assumptions, and business models that are still being shaped. Eric Ries, author of The Lean Startup, defines a startup as “a human institution designed to create a new product or service under conditions of extreme uncertainty,” and that reality hasn’t changed.
This uncertainty is one of the main reasons early attempts often break down. Still, failure is not a final outcome in the startup world, it’s a learning point. Each setback helps teams refine the product, correct assumptions, and adjust direction. For startups, encountering failures is natural, and using them as fuel for improvement remains one of the defining behaviors of successful early-stage companies.
3. Being a Talent Bank
Attracting and hiring talented people with diverse backgrounds who can handle pressure, learn quickly, and stay focused through challenges is essential once a startup begins to take shape. A strong team should be formed around motivated individuals who genuinely identify with the company’s mission and culture.
Team members should feel that their work creates real value and that they play a direct role in moving the company forward. When people see their impact and operate within a clear, supportive culture, they strengthen the startup’s resilience and contribute to faster, more sustainable growth.
4. Use of Non-Traditional Financing Structures to Achieve Scale
Many early-stage startups begin as bootstrapped ventures, funded by founders and, in some cases, by friends and family. Because startups usually work with intangible assets, such as technology, intellectual property, and team capabilities, and profitability comes much later, traditional financial institutions rarely provide early-stage financing.
This gap has led to the rise of non-traditional, high-risk and high-return funding options such as angel investing, venture capital, and venture debt. These models provide not only capital but also access to experienced investors who can offer guidance, connections, and industry-specific expertise. In recent years, additional financing paths such as equity crowdfunding, accelerators, and government innovation grants have also become important sources of early support.
Some successful startups have scaled entirely through their own cash flows without using any of these external vehicles. However, receiving outside investment usually signals that the startup has demonstrated meaningful growth potential and the capacity to create significant impact.
What is and is not considered a “startup” for StartupBlink?
As outlined in our Global Startup Ecosystem Index 2025, we define a startup as any business that applies an innovative, technology-enabled solution with the potential to achieve scalability. While the characteristics mentioned earlier remain relevant, the decisive factor for us is innovation. This innovation can be rooted in technology or in a uniquely scalable business model.
Because of this, traditional service providers, agencies, and non-scalable local directories, such as real estate listings or companies offering purely local services, are not considered startups in our framework we do not feature them on our map.
We also maintain clear guidelines on what is no longer considered a startup. The most common reason is when a company ceases operations. However, there are also positive milestones that lead us to remove a company from the active startup count. These include:
Reaching unicorn status (a private valuation above $1B).
Becoming a publicly traded company.
Being acquired by another entity before reaching a $1B valuation.
Although these companies are removed from the list of active startups, they remain highly important indicators of ecosystem strength. For that reason, we categorize and display them on our platform as Exits, Unicorns, or Pantheons, ensuring their contribution continues to be reflected in our rankings.
Find out more about the most innovative cities and countries in our latest reports.
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