A Thought Experiment in Sovereignty, Strategy, and Survival. For years, founders have leaned on metaphors from war and sport. We speak of blitzscaling, of moats, of sprints and marathons. But what if we stretched the metaphor further? What if we imagined a startup not as a company in a market, but as a sovereign state in an anarchic world order?
This is not just play-acting. The metaphor can sharpen how we think about strategy. States must balance defense, diplomacy, internal governance, and economic stability, and so must startups. Strip away the flag and anthem, and the parallels are striking.
According to Dipal Dutta, CEO of RedoQ “A startup’s founding is an act of declaring independence. It begins by targeting a small, underserved territory and secures its initial footing by creating a simple, effective product. This attracts a loyal base of citizens, who provide both early funding and a vital first line of defence. As its user base grows, the company expands its territory with new features. It practices smart diplomacy by forging partnerships with established players, gaining access to new markets without expensive conflict. Its survival is based on building a valuable, interconnected system that becomes necessary to both users and partners, rather than force”.
Defense: The Startup’s Army and Borders
A sovereign state first secures its borders. Without defense, there is no survival. For startups, defense is the moat, intellectual property, network effects, distribution strength, or regulatory approvals. The army is not soldiers but engineers, lawyers, and community managers who patrol the boundaries of the product.
The startup-state faces constant incursions. A better-funded rival copies your feature. A regulator issues a new mandate that renders your business model shaky. A tech giant quietly blocks your API access. Survival demands not just defense but anticipatory security: building redundancies, lobbying for favorable rules, and designing products that are hard to replicate.
Just as states oscillate between isolation and alliances, startups must decide how open their borders are. Do you integrate with competitors and risk dilution? Or do you close your ecosystem, like a fortress, risking irrelevance if the outside world moves on?
Currency: The Startup’s Money and Trust
Nations rise and fall on their currencies. The US dollar’s dominance rests not only on the Fed but on global trust. Similarly, a startup’s currency is twofold: the cash in its bank and the trust of its stakeholders.
Venture capital is foreign direct investment. It props up your reserves but comes with conditions, sometimes even the equivalent of IMF-style austerity: cut burn, raise revenue, show discipline.
Customers, meanwhile, trade their attention, data, and loyalty in exchange for the value you provide. Lose that trust, and your currency collapses faster than any balance sheet can warn. Inflation in the startup-state is dilution. Issue too much equity too fast, and you erode the value of early believers. Default is churn, when users abandon you, no bailout can restore the economy.
Diplomacy: The Startup’s Foreign Policy
A state without allies is vulnerable. A startup without partners is lonely. Diplomacy in this metaphor is about how you negotiate with incumbents, platforms, regulators, and even rivals.
Some pursue a non-aligned movement: refusing to bend to Big Tech, keeping independence as sacrosanct. Others become client states, dependent on Google’s app store or Amazon’s cloud. A few play the balance-of-power game, partnering with one giant to counter another.
Founders, like diplomats, must read the mood of the room, anticipate shifting alliances, and sometimes make unpalatable compromises for survival. Uber’s surrender in China, ceding to Didi in exchange for equity, was less a defeat than a diplomatic settlement.
And just as states maintain embassies abroad, startups cultivate relationships with venture firms, media, policy think tanks, and industry associations. These are not cosmetic. They are the infrastructure of influence.
Bureaucracy: The Startup’s Civil Service
States do not run on armies and diplomats alone. They need bureaucracy: the slow, boring machinery that collects taxes, enforces laws, and manages welfare. For startups, bureaucracy is internal process, HR, compliance, accounting, onboarding, customer service.
Founders often disdain this, imagining themselves as revolutionary leaders. But without bureaucracy, revolutions collapse. Startups that scale without internal institutions end up as fragile, chaotic states where no one knows who does what. Process is paperwork, but it is also continuity.The test of bureaucracy is succession.
Can your state survive a leadership change? If your CTO departs or your Head of Ops burns out, does the institution hold, or does it unravel like a failed state? Mature companies are not just large; they are institutionalized.
Beyond the Analogy: Sovereignty and Survival
Every startup-state dreams of sovereignty: to chart its destiny free of external control. But complete sovereignty is an illusion. Just as no nation can isolate itself from global markets, no startup can ignore regulators, investors, or incumbents.
What matters is not purity of independence but degrees of freedom. Can you negotiate terms rather than accept diktats? Can you choose partners rather than beg for protection? Sovereignty in startups is not absolute power but bargaining power.
Why This Thought Experiment Matters
The metaphor of the startup as a state is not mere whimsy. It disciplines our imagination. It forces us to ask:
- What is our defense strategy? Are we secure against incursions?
- What is our currency? Do people still trust it?
- What is our diplomacy? Are we building alliances or fighting unwinnable wars?
- What is our bureaucracy? Are we institutionalizing for longevity?
These are not just abstract questions. They are survival questions.
The Final Word
To run a startup is to live in a condition of near-anarchy, where rules are evolving, threats are constant, and the future is radically uncertain. International relations scholars call this the security dilemma: every move to make yourself safer makes someone else feel threatened, triggering escalation. Replace missiles with product launches, treaties with term sheets, and you see the resonance.
The startup-state is fragile, often short-lived, sometimes spectacularly failed. But for the rare few, sovereignty becomes real, they mint their own currency, command their own armies, and dictate the terms of diplomacy. And perhaps that is the ultimate founder fantasy: not just to build a company, but to found a nation.
