Cresh · Guide

What makes a startup different from an ordinary business?

A concise guide for anyone considering a business idea. Four classic definitions, a glossary of essential terms, some revealing numbers on business survival, and an explanation of how Cresh assesses an idea’s potential.

About a 10-minute read · Sources at the end

Chapter 1

Four ways to define a startup.

There’s no single official definition of a startup. These four are among the most widely cited. Each emphasizes something different: Blank focuses on finding a business model, Ries on uncertainty, Graham on growth, and Andreessen on product-market fit.

„a startup is an organization formed to search for a repeatable and scalable business model.”

A startup is an organization created to find a repeatable and scalable business model.

Steve Blank · 2010 · What’s A Startup? First Principles

„a human institution designed to create a new product or service under conditions of extreme uncertainty”

A human institution created to develop a new product or service under conditions of extreme uncertainty.

Eric Ries · The Lean Startup · The Lean Startup – Methodology

„A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup.”

A startup is a company designed to grow quickly. Being newly founded isn’t enough to make a company a startup.

Paul Graham · 2012 · Startup = Growth

„Product/market fit means being in a good market with a product that can satisfy that market.”

Product-market fit means operating in an attractive market with a product that meets that market’s needs.

Marc Andreessen · 2007 · The only thing that matters

Chapter 2

Glossary: eleven terms worth knowing.

Burn rate: How much cash a company loses each month: the amount by which spending exceeds incoming cash.
CAC: Customer acquisition cost: sales and marketing spending over a period divided by the number of new customers acquired during that period.
CAGR: Compound annual growth rate. A market that grows from $100 million to $150 million in four years has a CAGR of about 10.7%.
LTV: Customer lifetime value: the margin a customer generates over the entire relationship with a product. It’s often compared with CAC.
Gross margin: The share of revenue left after the cost of producing or delivering a product: (price − unit cost) / price.
MVP: Minimum viable product: the simplest version of a product that lets you test a critical assumption with real customers.
Pivot: A change of direction: the company replaces a core assumption about its product, customers, or growth strategy and tests a new one.
Product-market fit: The point at which a product meets a genuine need in a viable market. Customers buy and return without requiring a disproportionate sales effort.
Runway: How many months a company can operate at its current burn rate: cash available divided by monthly cash burn.
TAM, SAM, SOM: Three measures of market opportunity: the total addressable market (TAM), the serviceable available market (SAM), and the share realistically obtainable in the coming years (SOM).
Unit economics: Revenue and costs per customer or order. Unit economics show whether each sale makes financial sense.

Chapter 3

How many new businesses survive, and why others fail.

Only one in three is still operating after ten years

The US Bureau of Labor Statistics (BLS) tracks businesses founded in the same month. Of those established in March 2013, 79.6% were still operating after one year, 50.6% after five years, and 34.7% after ten. These figures cover all new private-sector establishments in the US, not startups alone.

Source: U.S. Bureau of Labor Statistics, 2024

Running out of money is often the final symptom

CB Insights analyzed 431 venture-backed startups that shut down from 2023 onward. Running out of funding appeared in 70% of cases, but the report notes that it’s almost always the final cause, not the underlying problem. Earlier warning signs included:

43%poor product-market fit
29%poor market timing
19%unsustainable unit economics

Companies could report multiple reasons, so the percentages don’t add up to 100%. Source: CB Insights, March 2026

Chapter 4

How Cresh evaluates the potential of an idea.

Many of the issues in Chapter 3 can be investigated before you spend your first dollar. That’s why our analysis asks 13 questions across four areas.

Market

01Does anyone have this problem, and are they already paying to solve it?
02How large and stable is the market?
03Is demand growing, and is that growth sustainable rather than a passing fad?

Competition and barriers

04Who is already doing this, and how firmly do they control the market?
05Can your advantage be defended through a patent, data, or brand, for example?
06Does the idea comply with relevant laws and regulations?

Product and go-to-market

07Is the solution clearly better or cheaper than the alternatives?
08Is it easy to get started?
09How does the cost of acquiring a customer compare with their value?

Financials and feasibility

10How much revenue remains after unit costs?
11How much upfront investment is needed relative to the budget?
12How many months will it take to recover the investment?
13Can the team get from its current stage to market?

How the score is calculated

Each answer receives a score from 1 to 5. Some scores follow clearly defined qualitative criteria; others come from calculations compared against benchmarks, such as market growth of around 3% a year or the typical gross margin in the industry.

The average of all 13 scores places the idea on a scale from low to high potential. An idea that breaks the law won’t receive a favorable verdict, even with a high average. The same applies when there’s no real customer need or the idea can’t realistically be executed.

Low potential1.0–2.2

Needs further investigation2.2–3.0

Conditional potential3.0–3.8

High potential3.8–5.0

This is an initial screening, not a substitute for customer interviews or market research.

Chapter 5

Three cases, three very different risks.

These hypothetical ideas show that the biggest weakness is rarely where you first expect it. They are illustrations, not descriptions of real businesses.

Regulation

AI résumé screening

European Union

Recruitment is a large market, and businesses are keen to automate application screening. But the real challenge lies elsewhere. Under the European Commission’s guidance on the AI Act, AI systems used to recruit or select candidates, including systems that filter applications, are classified as high-risk (Annex III, point 4(a)). This brings documentation, human oversight, and conformity assessment requirements before market entry.

Takeaway: An attractive market isn’t enough if regulatory hurdles delay your first customer.

Source: AI Act Service Desk, European Commission

Payback

Homeowners in France and Belgium receive contractor quotes for insulation and windows

France and Belgium

Demand and margin look healthy, and getting started doesn’t take a large investment. The weak point is elsewhere: plenty of quote platforms for insulation and windows already compete, and payback takes a long time. The verdict: conditional potential.

Takeaway: Strong demand doesn’t settle it when your edge is thin and payback is far off.

Margins

Subscription-based baby clothes rental

United States

The idea addresses a real problem for parents, but the unit cost goes beyond the clothes themselves. Laundry, two-way shipping, and wear and tear add up. If a subscription costs $100 and each rental costs $72 to fulfill, the gross margin is 28%. That leaves little room to fund marketing.

Takeaway: Physical products are easy to underestimate in a subscription model. Calculate the cost of each rental cycle before setting a price.

Have an idea of your own?

Put it through the same 13 questions.

The Business Idea Potential analysis evaluates an idea against 13 metrics in four areas. All you need to start is a name and a short description.

Explore the analysis

13 metrics · 4 areas · 1–5 scoring scale