Your Gambit

Well, every startup is a business but not every business is a startup, that said, looking into a definition “a business is the act of buying, selling as a way to earn money, it can be further defined as an organization or enterprising entity engaged in commercial, industrial or professional activities.”

When the business is in their early years that is any where below 10 years of age can be referred to as a startup. However to be able to precisely pin point a startup you’d ideally have to take a look at the following key elements:

1. the product or service
2. the business model
3. GTM strategies
4. Funding
5. Growth Strategies

To be more precise let’s pick up each of these

1. The product or service

It all starts with a disruptive idea or in other words innovation and creativity. An entrepreneur may select an existing product or a service and add an additional feature to it OR come up with a completely new innovation (usually seen with tech startups), what differentiates them from a business, would be the innovation and need for a disruptive business model. So, when something is unique, innovative and possibly could be copied by a competitor in the same industry, you’d understand why moving fast is the only alternative to disrupting the market, Right? A business ideally wouldn’t mind growing slowly and in the traditional manner and it would be more profit oriented.

2. The business model

A startup will have a business model that may have unusual amounts of high spends on Research and Development, Marketing, securing of grants, Patents and spends on operations and strategy. This would be considered a loss making but modern business model ensuring scalability with ROI that could be recovered 2x or more at the later stages of the business. Whereas a small business will be growing traditionally with the aim to break-even or be profitable since its inception.

3. GTM or Go To Market Strategies

A startup will spend high amount of money on performance marketing, branding, story-telling and awareness campaigns to grab the attention of their target audience, in most cases these spends are so huge that a startup will eventually end up seeking funds at various stages of their journey and diluting equity (equity=ownership). It’s not necessary for a startup to go through all stages of funding as each type of funding has an objective attached to it.

4. The Funding

Initially both small businesses and startup start the same way. They are bootstrapped in the beginning with initial spends from the founders / owners. But as time progresses and depending on how fast and whether a disruptive approach is required for high growth and scalability of a product or service, is what will distinguish the startup from a business. Ideally no person in their sane mind will want to invest in a business that is making a loss and also no person in their sane mind would ask for investment if there were profits, startups are considered a middle ground here and as mentioned earlier because of their business model the ROI (Return on Investments) may show up a bit later.

Ideally it is very clear that a startup comes with a high-risk because growing exponentially while making losses at the beginning due to a high spend and disruptive business model requires a man or woman of steel kind of situation. Further Entrepreneurs are required to be high risk takers and visionaries who are able to have a well chalked out growth plan, and in some cases a good exit strategy.

Short line, all businesses start as a startup with an idea or plan but as time moves by the decisions and speed of growth, and funding is what will primarily distinguish a small business from a startup.