Is a startup the same as a small business?

Usually, by the SBA's measures: the new US business locations of the year to March 2025 averaged 3.6 workers, far below the 500 employees the SBA's Office of Advocacy uses. The two words still mean different things. A small business is defined by its size, and a startup by its design to grow fast, in Paul Graham's words.

How is a startup different from a small business?

By intent. Paul Graham's example is the barbershop, which serves customers in person in a market that stays local. A startup is designed to grow fast, and Graham puts a good growth rate at 5 to 7 percent a week.

What makes a company a startup?

A design to grow fast, in Paul Graham's definition. He adds that a startup need not work on technology, take venture funding or plan an exit. Steve Blank calls a startup an organization formed to search for a repeatable and scalable business model.

What is considered a small business?

For federal programs, a business that the SBA's size standards call small. The standards vary by industry and rest on employees or annual receipts, and the business must be for-profit and independently owned and operated. In its statistics, the SBA's Office of Advocacy generally uses fewer than 500 employees.

How many new businesses are started each year?

The Census Bureau counted 5,671,836 business applications in 2025, the most in any full year since its series began in 2004. Far fewer become employers: of the 5,390,816 applications of 2021, 403,072, or 7.5 percent, had become employers within two years. The Census counted 508,777 new employer firms in 2023.

What is the difference between a startup and a new business?

Intent. A new business is any business that has just begun. A startup, in Paul Graham's words, is designed to grow fast, and being newly founded does not by itself make a company one. The Census Bureau, for its part, uses the word startup for every new employer business.

What Is a Startup? How It Differs From a Small Business

A startup is a company designed to grow fast. That is how Paul Graham’s essay “Startup = Growth” of September 2012 puts it. Graham adds that “being newly founded does not in itself make a company a startup”. The US government counts new businesses by another measure, their requests for a tax number. In 2025 the Census Bureau counted 5,671,836 such business applications, its highest full-year total since its series began in 2004.

Few of them turn into firms that hire: of the 5,390,816 applications filed in 2021, 7.5 percent had become employers within two years.

Business applications in the US each year, 2005 to 2025Applications for an employer tax number filed for business purposes, in millions a year. The third line counts those that became employers within two years, known through 2021.

	All business applications	High-propensity applications	Became employers within two years
2005	2.49M	1.47M	0.48M
2006	2.62M	1.54M	0.45M
2007	2.63M	1.49M	0.41M
2008	2.56M	1.26M	0.35M
2009	2.41M	1.15M	0.32M
2010	2.47M	1.15M	0.32M
2011	2.55M	1.18M	0.33M
2012	2.55M	1.15M	0.32M
2013	2.59M	1.16M	0.33M
2014	2.69M	1.18M	0.34M
2015	2.80M	1.20M	0.35M
2016	2.95M	1.23M	0.35M
2017	3.18M	1.26M	0.35M
2018	3.49M	1.33M	0.37M
2019	3.50M	1.32M	0.36M
2020	4.36M	1.52M	0.35M
2021	5.39M	1.84M	0.40M
2022	5.06M	1.72M
2023	5.47M	1.85M
2024	5.22M	1.72M
2025	5.67M	1.71M

Applications more than doubled from 2005 to 2021, while the number that became employers within two years fell.

Source: US Census Bureau, Business Formation Statistics, yearly sums of the monthly series, release of October 14, 2026

What do founders mean by a startup?

Three definitions, each in its author’s own words:

Author and year	Definition
Paul Graham, 2012	“A startup is a company designed to grow fast.”
Steve Blank, 2010	“an organization formed to search for a repeatable and scalable business model”
Eric Ries, 2010	“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”

Between them, the three speak of growth, scale and a search under uncertainty, and none sets an age limit or a source of money. Graham says so outright: a startup need not work on technology, take venture funding or plan an exit. “The only essential thing is growth”, he writes.

How fast is “designed to grow fast”?

Graham gives the numbers in the same essay: “A good growth rate during YC is 5-7% a week”. His own table shows what weekly growth adds up to in a year:

Growth a week	Growth in a year
1%	1.7 times
2%	2.8 times
5%	12.6 times
7%	33.7 times
10%	142.0 times

His example is the barbershop, which “serves customers in person, and few will travel far for a haircut”. Google, by contrast, “was different from the beginning”.

How does the US government count new businesses?

The Census Bureau’s Business Formation Statistics start from the tax office. A new business that wants an Employer Identification Number files IRS Form SS-4 for it. That number is “a unique 9-digit number assigned by the IRS to entities for tax purposes”. The Census counts each “EIN application made predominantly for business purposes” as a business application.

It then sorts them: high-propensity applications have “a high-propensity of turning into businesses with payroll”. They come from a corporation, plan to hire, name a first date for wages, or fall in industries such as restaurants and health care. A business formation is the moment an application becomes “an employer (wage-paying) business”. The Census finds it in payroll tax records within four or eight quarters.

The Census uses the word startup too, for every new employer business. Its release of October 14, 2026 calls projected formations “new business startups”, and its Business Dynamics Statistics counted 508,777 new employer firms in 2023.

How many new businesses start each year?

Applications held near 2.5 million a year from 2005 to 2013. They reached 3.5 million by 2019, then jumped to 4.36 million in 2020 and 5.39 million in 2021. The total for 2025, 5,671,836, is the highest of any full year. The first nine months of 2026 brought 4,927,840, or 15.3 percent more than the same months of 2025.

The share with a high propensity to hire has fallen every year, from 59.2 percent of applications in 2005 to 30.1 percent in 2025.

How many of them become employers?

The Census follows each year’s filings into payroll records. For 2021, the latest year with a full count, the steps look like this:

Step in 2021	Count	Share
Business applications	5,390,816	100%
High propensity	1,841,954	34.2%
With planned wages	638,140	11.8%
Employer within 2 years	403,072	7.5%

That last share has been falling. Of the filings of 2005, 19.5 percent became employers within two years, and of those of 2019, 10.2 percent. Applications more than doubled from 2005 to 2021, while the number that became employers fell from 483,686 to 403,072.

None of these official series counts firms designed to grow fast. Graham’s own estimate is blunt: “Millions of companies are started every year in the US. Only a tiny fraction are startups”.

What does the SBA count as a small business?

The law defines small businesses by size, and the federal rule, 13 CFR 121.101, puts it in one line. SBA’s size standards “define whether a business entity is small and, thus, eligible for Government programs and preferences”.

The standards vary by industry and are “generally based on the number of employees or the amount of annual receipts”. The SBA’s guide adds four conditions. A small business is for-profit, independently owned and operated, not nationally dominant in its field, and based in the US.

In its statistics, the SBA’s Office of Advocacy uses a single line. It “generally defines a small business as an independent business having fewer than 500 employees”. By its count of February 2026, the US has 36,207,130 small businesses, or 99.9 percent of all businesses.

Is a startup a small business?

Usually, by the SBA’s measures, because new businesses start small. The 980,333 new business locations of the year to March 2025 averaged 3.6 workers, by the US Bureau of Labor Statistics. The difference lies in intent, which no size standard measures. A small business can stay the size of its market, like Graham’s barbershop, while a startup is designed to outgrow it.

What is a startup often confused with?

Any new business. In Graham’s words, “being newly founded does not in itself make a company a startup”. The Census, for its part, uses the word for every new employer business.
A tech company. A startup need not work on technology, Graham writes.
A company with venture money. He leaves venture funding and an exit out of his definition too.
A small business. Most startups are small businesses by the SBA’s measures. The two words describe size and intent.

Founders can add their company to TheCompanyIndex.com for free. A person reads every entry before it goes live, and an approved entry gets its own page with a followed link.

What this page could not check

This page found no official US definition of a startup in the founders’ sense. The SBA defines small businesses, and the Census uses the word for every new employer business.
None of the official series used here counts firms built to grow fast.
An application is a request for a tax number, and most do not lead to an employer within two years.
Counts of employers formed after 2021 exist only as Census projections, which this page leaves out.
The Census revises the high-propensity series. Since January 2026 it leaves out filings tied to internet sales, for all years, so older published figures differ.
December 2025 was hit by an outage of the IRS’s online EIN service, from December 30, 2025 to January 5, 2026.
The SBA’s 2026 FAQ is a PDF that could not be read as text, so its 500-employee wording is quoted from the 2023 web page.
The three founders speak for themselves, and none of their wording has legal force.
The Census applies its annual update to these series on November 12, 2026, and every count here is due for a check then.

Sources

Paul Graham, “Startup = Growth”, essay, September 2012.
Steve Blank, “What’s A Startup? First Principles.”, blog post, January 25, 2010.
Eric Ries, “What is a startup?”, Startup Lessons Learned, June 21, 2010.
US Census Bureau, Business Formation Statistics: “Definitions”, “Methodology”, main page notices and the monthly data file of release CB26-163, October 14, 2026, read October 24, 2026.
US Census Bureau, Business Dynamics Statistics 2023, released September 25, 2025; “BDS Methodology”, revised June 18, 2026.
Electronic Code of Federal Regulations, 13 CFR 121.101, “What are SBA size standards?”, up to date as of October 22, 2026.
US Small Business Administration: “Size standards”, federal contracting guide, updated July 28, 2026; Office of Advocacy, “Frequently Asked Questions About Small Business, 2023”, March 7, 2023, and “Frequently Asked Questions About Small Business 2026”, February 3, 2026.
US Bureau of Labor Statistics, Business Employment Dynamics, Table 7, data to March 2025.

What is a startup? How it differs from a small business