There’s a nasty little lie that keeps getting passed around the economy like a like a VC quote on LinkedIn: that every new business built on a new technology is a “startup.”
It’s how we got here, misunderstanding the difference between a startup and a business. The bloated graveyard of Web3 ventures, now being backfilled with AI “startups,” isn’t a cautionary tale about blockchain or metaverse, it’s a meaningfully clear signal we can’t keep ignoring or apologizing for disregarding, that most of what founders built weren’t startups at all; they were businesses in costume, trying to pass for startups because startups are sexy (supposedly). Sexy raises money. Sexy gets you tweets. Sexy gets you keynote stages and free t-shirts at the local Accelerator.
But sexy doesn’t scale. Sexy doesn’t survive when the hype dies.
The same thing happened with Web 2.0. It’s happening right now with AI. Founders jump on the innovation trend du jour and build products on top of it, mistaking the presence of a new technology for the presence of a new venture model.
Just because you’re using blockchain, AI, or quantum fairy dust doesn’t mean you’re running a startup.
Startups are not just new businesses. Startups are new business models.
They’re not “another version” of an existing idea with tech sprinkled on top. A startup creates an entirely new kind of economic behavior, often enabled by innovation but not reducible to it. It changes how markets operate, how customers behave, or how industries are structured. It breaks something, reconfigures it, and creates disproportionate value by doing so.
A fundable startup delivers 15x+ returns because it has to; otherwise, it can’t offset the 90% failure rate of the rest of the VC portfolio. In contrast, a business has a far more survivable model (about 54% fail), but it will never return what VCs need to justify the risk. VC isn’t being mean. It’s math.
And yet… the entire Web3 boom (and bust) was full of businesses dressed as startups begging for VC dollars. A therapy app using AI isn’t a startup; it’s a therapy app. A VR-enabled property showcase? That’s a design agency with a headset. A decentralized social network? Just another social network.
These aren’t bad ideas. In fact, many can succeed beautifully, generate wealth, and even exit. But none are changing the fundamentals of the business they’re in. They are businesses, and when they try to play the startup game, they not only mislead themselves, they poison the well for everyone else.
So, where’s the real failure? It’s not founders being ambitious. It’s mentors, investors, and the peanut gallery giving one-size-fits-all startup advice to people who are, in fact, building businesses. Advice like “focus on revenue” is classic. It’s what a VC tells a founder who shouldn’t be in a VC conversation at all. It’s not bad advice; it’s just not startup advice.
This perpetuates a myth: that startups should focus on revenue too. No, they shouldn’t, not in the early stages. Startups are in a race to discover scale, not to prove profitability. Revenue is a lagging indicator of value capture; scale is the leading edge of innovation (adoption of invention).
Founders keep getting told they’re doing the right things (revenue, retention, burn rate) but those things matter differently depending on whether you’re building a business or a startup. And that’s the line we’ve all stopped being able to see clearly.
So, how do you actually discern good advice from garbage? Here’s a litmus test:
- When someone gives you advice, ask them: “Thank you. Why?”
- If that checks out, press further: “Great. How do we do that?”
- Then, push again: “Wonderful. So we’ll do that. Here’s what we need from you.”
If your advisor can’t explain, assist, or participate, discount the advice. Not because it’s wrong, but because it might be. An investor says “focus on customers”? “Why?” “Great, how?” “Wonderful, give us half the funding we’re seeking and we’ll do that.” If they really knew how to help, wouldn’t they be offering intros, resources, or at least clarity?
Let’s look at two examples to make this real:
You want to open a crypto-themed restaurant that rewards loyal diners with blockchain tokens. That’s a business. Could be fun, could work (ha, maybe). But don’t call it a startup. You might get good advice, but the guy who mentors disruptive SaaS founders isn’t your guy because you are starting a restaurant and if that fails, you fail. Don’t mistake startup tips for gospel.
Now, imagine you’re building an AI fintech platform that integrates with credit cards and bank APIs to manage debt negotiation and repayment in real-time. That’s a startup. If your advisor gets it, they’ll offer something tangible: education, funding leads, a great connection, or maybe even a pilot partner (IF they know their advice is meaningfully valid).
In either case, the ability to distinguish a business from a startup (and qualify the advice you’re getting based on that) can save you years of wasted time, embarrassment, and missed opportunity. And frankly, it could save our entire ecosystem from continuing to burn cycles propping up zombie companies who were never supposed to be advised like startups in the first place.
If at any point in that advice validation discourse, the mentor or investor can’t explain or won’t help, discount their advice.
That doesn’t mean it’s wrong (it might be right), it means you have to discount it.
Why? How do I know you should discount it??
Well, work backwards. If I was giving you advice I *know” will work out for you… wouldn’t I help you in some way? Funding, resources, intros, or direct help?
If I know that my help is worthwhile, wouldn’t I be able to explain you how to do it? I’m not just regurgitating common advice; I know how to do it.
In either case, you have to understand how to discount or even dismiss what you hear by discerning the difference between business and startup.
I’d push through #3 in our fintech scenario because I work with startups. I wouldn’t always push through #3 with advice, I certainly don’t know everything. But I would with some of my advice because I know startups. And where I wouldn’t get to advice validation point #3, I’d be able to tell you how to do what I’m advising (or I wouldn’t advise it!) In turn, you’d know what to discard that I advise when I won’t go through the steps of validating my advice.
I would not survive validation of advice in our restaurant scenario because I don’t know how to make such businesses successful; and such things should be successful – we know how to make restaurants successful (I don’t but our economy does). Thus, you’d know to take my advice with a huge grain of salt while instead listening to the business advisors who work with restaurants.
What we should have learned from the implosions of early Web3
That overhyping a technology doesn’t build a startup.
That chasing capital without understanding venture economics is a fool’s errand.
That conflating innovation with invention or business is why so many smart founders wind up angry, broke, and bitter at an industry they never really understood.
If you’re going to play the founder game (whether you’re launching a new business or building a startup) you need to learn the rules. If what you’re building is a business, own that. Be proud of it. Just don’t cosplay your way into venture capital; it’s a model that isn’t designed for you. Because Web3 didn’t fail. We did, by refusing to admit that slapping a new technology on an old business model doesn’t magically make it a startup. It just makes it a business with new tech. And that’s okay, until you pretend otherwise.
