Startups Vs Scaleups
This article is written by Jeremiah Uke, a Contributor Author at Startup Istanbul.
Over the last 2 decades in technology eco-systems all over the world, startups have been the major headliners for most discussions in driving economies and innovation, until much recently. Some attention has been pushed towards scaleups which are a similar concept to startups, but with a few differences that set them apart.
In simple words, a startup is a relatively new company which is just a few years old or less, startups are characterized with having big plans for growth, and usually have no geographic restrictions, they are open to spreading across countries if they are able to.
So, if you own something in the range of a provisional store in California, with no plans of growing your store into something bigger, or spreading to a new location, then you are just a small business, and not a startup.
A scaleup on the other hand, is a company with a validated product and business model, has an average annual return of at least 20% in the past 3 years, and at least 10 employees. Scaleups are evolved startups which have succeeded in solving the challenges of market research, development, and finding a stable working business model.
Also, scaleups are characterized by huge numbers. Huge numbers expressed in areas such as revenue, number of employees, and the number of users or customers they get. One key difference between these two closely related concepts is found in the challenges they face, a startup’s biggest challenge is finding a scalable business model that can be repeated year after year. While a scaleup’s biggest challenge is growing the already discovered business plan to gain more revenue and traction.
Because they are yet to fully figure out their product-market fit, startups do a lot of experiments and they spend a lot just to figure out what will earn them revenue. Scaleups have it much easier in this area, they know exactly how much they would get when they put a particular amount of money in the business.
When it comes to their Team & workforce, startups need a small number of people who are good at doing many things. For example, a startup can have a founder who is able to write code, draw up financial projections and reports, and attend meetings with potential investors or business partners.
At the other end, scaleups need specialists, they employ many people who are able to play just one role, scaleups employ engineers, support staff, project managers, designers, developers, administration and human resources, and several managerial personnel. Of course, these scaleups have to find a way to make all members of their team work as one unit.
Startups spend their time trying to find out their strongest points, so they can leverage on these strong points and convert them to some kind of value, Having already figured out their strongest points, scaleups spend their time trying to figure their weak points, fixing them and tightening and loose ends.
Due to the huge amount of revenue they generate, scaleups are capable of making their founding team relatively rich. While startups are more likely to push their founders into the limelight, making them famous in the process.
You really can not remain at the startup stage for so many years, startups either die off, or transition to becoming scaleups after years of being in business, there really isn’t any middle ground.