Are there differences between a startup and a conventional company?

Are there differences between a startup and a conventional company? by ISEA

One of the most commonly used terms in the business sector is undoubtedly startup, which refers to an emerging company. Although it is not a new proposition, it is commonly used as a synonym for “company”. In fact, it is common for companies to use this term to define themselves in order to win customers. Given this situation, it is worth asking whether there is a difference between an SME and a startup. 

What is a startup?

Over time, different authors have defined startups. Will Schroter, for example, defines it as “the entity through which a team led by a founder can make a dream come true, not only for him, but for the world”. It is then a digital startup with the potential to grow. 

Differentiating an SME from a startup

For starters, longevity makes a difference. A startup is always young, but at the same time, a young company is not necessarily a startup. The startup has been created to have exponential growth in a short period of time. Entrepreneurs aspire to achieve a funding round scheme to make their companies grow and improve. In contrast, a conventional company will resort to a line of credit or a bank loan, at least in its early stages. 

While an SME expects a growth of say 10% per year, the startup is looking to multiply up to five times per year. Many large emporiums such as Google or Amazon started as startups. What do they have in common? They are purely technological and are related to the Internet and ICT. 

So, the startup is related to technology and it is common for it to adhere to digital models, different from the conventional. Unlike many SMEs, young or not, innovation is a constant, as well as agile decision making. Startups are prone and open to change in a short time to adapt to changing market needs. An SME, on the other hand, does not tend to change its business model.

Innovation in startups

Agile processes are also part of a startup. In addition, its financing usually comes from private capital, so when it goes public, it would no longer be a startup. And the same applies if it is bought by another company or if there is a merger. But if this is not the case, the startup will have no problem reinventing itself, transforming itself and acting in accordance with the times. 

Therefore, the startup will focus on offering simple solutions to complex or big problems. However, it must really solve the need of its potential customers, or else it will fail. In fact, 60% of this entrepreneurial model tends to close when it does not solve that need in the market. 

How to start a startup?

Although there are different opinions about it, we can end with the following steps to launch your startup:

– Problem? Solve it with your startup. That’s where it all starts, without focusing entirely on the profit return. It must also be something that motivates you a lot every day. 

– Launch it… but do market research. Yes, your idea may be good, but conduct small tests to see if your product or service “sells”. 

– Formalize. If you have already passed the previous check lists, formalize your proposal through a pitch deck focused on potential customers and investors.

– Create a solid branding. This way you attract attention and get sales. 

– Don’t forget the legal aspects. In addition to all of the above, formalize a legal structure: get expert advice.

– Seek external financing. 

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