“Startups are the future”, “Startups are the new thing”, “Startups are emerging”, these are all phrases I’m pretty sure you’ve heard before. It’s all what people talk about nowadays. But have you ever taken a step back and asked yourself, “What is a startup?” And what qualifies a business as a startup, and another as a small business? Well, for sure there’s a huge difference between a startup and a small business- and here is all you need to know about it.
A small business doesn’t plan a business model that works down the line. All they’re looking for is a business model that works from day one, doesn’t require major investments or time for the company to work. However, A start-up, relies on an innovative idea to solve a problem in a specific market, through a scalable business model and a huge investment.
The start-up is characterized by other qualities that make it radically different from the small businesses, like
Innovation is what distinguishes startups than any other business, whether in the product itself, the way it’s produced, or presented. An example of that can be seen in new startups like Careem, and Nexta. You’ll always find innovation in the use of technology for startups such as Nexta, which offers banking solutions, but through a mobile application without you having to go to any branch yourself.
2. Fast Growth
One of the most important characteristics of a startup is its ability to grow. The intent of startups is usually to disrupt and take over the market. They’re set out to search for the right business model that scales to enormous heights in a massive market—as fast as possible.
3. Ability to expand
Most of the successful startups eventually expand and scale up their business. Some expand in different countries and others in different cities. Growth & increasing the number of customers may be important but without expanding, it creates a risk of emerging competitors in other regions that may expand in your region later on.
Another of the biggest differences between a startup vs. small business? The way they're funded. Startups generally raise money via several rounds of funding: Pre Seed Funding, Seed Funding then Series A,B,C,D Funding rounds. However, small businesses rely more on bank loans rather than investors.
As you can see, startups and small businesses are actually much more distinct than most people would initially think. Now when starting a business, you can ask yourself: Am I starting a startup or a small business? With that answer, you’ll be more prepared to set goals, create a plan for the future and acquire funds.