What is a start-up and difference between startup and small business

Introduction

It might be confusing for some people the difference between start-up and small business. Usually, they see a small company started by having a mobile or web application and called it a start-up

So, when we name a company as a start-up and why we call it in this way?

According to Silicon Valley entrepreneur Steve Blank in 2010; he says: "A start-up is an organized form to search for a repeatable and scalable business model".

A Start-up is a company with business model that target to significantly impact and disrupt the current market.

Think of Companies like Facebook, Uber, Airbnb etc …… All of these companies in it's early phase was called a start-up.

While small businesses are companies that offer local services such as grocery shop, car services centre, educational centre etc..

In this context, let’s discuss further the aspects of each business model from different perspectives.

Business Goals

Start-up has a scalable and impactful business model, with aim to grow as quickly as possible and disrupt the market.

But what this actually mean? let’s take Uber as an example. Uber has disrupted the market of private transportation when they changed the traditional way which people used to move locally by taking a taxi or other form of local transportation. Uber caused a tremendous impact on this market of local transportation. Think about how the business of taxies before and after Uber.

While a small business don’t seek to disrupt the market or break into a completely new market. You just have the desire to run your own business that could generate profits.

By referring to the same case study, Taxi in this case can be considered a small business that generate profit for it’s owner.

In this context, we can find start-ups are typically founded in the tech industry, while small businesses are often what we consider "main street businesses"—local coffee shops, grocery stores, repair shops, and more. Although these businesses aren't disrupting the market, they are the cornerstone of local economies and employment

Growth plans

The start-up has a tremendous potential of growth, it’s business model is designed to not only dominate the local market, but to expand to international market too. Customers of start-up can count by millions or billions as in some cases such as Facebook, twitter, and many others.

On the other side, small business has a limited number of customers, and it is designed to run profitable local business as we explained previously.

End Target

When you start a small business, you start it with simply a target to stay in business, your business generates profits. At the end, you pass business to family member or sell it to one else

While start-up is a temporary organization which ultimately either to turn into a big company through integration with another big company or go public through listing in a stock market which is known by IPO (initial public offering). The main reason behind naming it as a start-up is that when founders kick start the business, the start-up may change the business model multiple times until they find the market-fit product/service, at that point it turns from a start-up to company

Funding

Usually, start-ups thrive to move quickly to dominate the market. Especially for these start-ups the have the merit of being the first ones to arrive or open a new market such as the case with Airbnb as an example. Start-ups seek funding to scaleup quickly. They usually raise fund from venture capital investors or angel investors in return of an equity in the start-up. Startup funding has been explained in details in this article. This process changes in the ownership form of the company.

While in small business, the company owner usually depends on his/her savings or debt financing such as loans to kick start their operations.

Key takeaways

• Start-up is different from small business
• Start-ups usually seek to enter a new market or already existing market but with competitive advantage that allow it to compete in the market.
• Start-ups has huge potential of growth up to millions of customers and can operate globally, contrary to small business which has a fixed business model that designed to operate locally and on limited level.
• Some start-ups want scale quickly to dominate the new market if found, so they raise fund from investors who are willing to fund these start-ups in return of equity in it.