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Startup is a term used for a company in its early stages, whereas when a company has already validated its product in the market and has proven its sustainability, then it becomes a scaleup. Today at Silicon Canals, we have come up with some important and basic factors that differentiate between a startup and a scaleup.
Take a look, if you’re still confused on how the two types of companies are different from each other.
#1 Startups vs scaleups: Stage of funding
Startups and scaleups are at different levels of growth. Eventually, they will also be at different levels of funding. Typically, startups will have seed funding or Series A funding or no funding at all. But a startup that begins the second round of funding will mostly progress into a scaleup. To put in simple words, if a startup can provide investors with a higher validation than an MVP, a great market opportunity and a trustworthy team, then it can be categorized as a scaleup.
#2 Startups vs scaleups: Product fit in the market
Next to the level of funding, the most prominent difference between startups and scaleups is the product fit in the market. Startups will be in the nascent stage and will be experimenting things such as customer acquisition cost, product features and customer segmentation. On the other hand, scaleups are companies that have proved that their products are sustainable in the market.
#3 Startups vs scaleups: Aversion to risk
This is one of the major differences between a startup and a scaleup. The more a company progresses, the great will be its aversion to risk. A company with an unproven product, zero market traction and a small customer base will not have to fear a lot about loss. This will make such a company come up with a new and unusual idea.
Previously, a success of a company was based on its ability to respond to the incoming feedback and implement ideas. However, the current scenario has changed drastically. Now, scaleups backed by investors are expected to multiply results quickly. Eventually, scaleups that make more money have to be careful about experimenting with new ideas.
#4 Startups vs scaleups: Non-challenging team
In a startup, it is quite common to see team members play multiple roles. Though employees are hired to play a specific role based on their skill set, they are expected to take on other roles and challenges as well the need arises. It is important to have “jack of all trades” in a startup to develop strategies, processes and systems all at the same time.
This practice is not seen in a typical scaleup. The scaleups need to have employees with narrow team roles. It is imperative to hire specialists for each role as scaleups focus on enhancing their growth.
#5 Startups vs scaleups: Leadership skill
The leadership skill required to run a startup will be different from that required for a scaleup. The skills required to hire, train and mentor the team members will vary to a great extent. In a scaleup that is a more grown-up type of company, it is important to roape in new skills from outside. And, in some cases, the leadership will extend into more specialized roles as well.
For more updates in the tech startup world, do stay tuned to Silicon Canals.