Startup is a name used for a company in its initial phase, whereas when an organization has already proven its presence within the marketplace and has shown its feasibility, then it becomes a Scaleup.
What many people think is that these terms are interchangeable which is not true. Rather, both the terms actually demonstrate two distinct stages of organization’s growth.
Here are some essential and basic factors that shows difference between a startup and a scaleup.
Stages of Funding
Since startups and scaleups are at different phases of growth, it should not be surprising that they will also be at different phases of funding. Mostly, startups have seed funding, series A funding or sometimes even zero funding. But the time when a startup begins its second round of funding, it will most likely progress into a scaleup and become financially viable to an extent through self-sustenance.
To put in simpler words, if a company can provide investors with more affirmation and an excellent market opportunity, then it can be comfortably be categorized into a scaleup.
Product Fit in The Market
The most important difference between startups and scaleups is the product – market fit. Startups are in the immaturity stage and testing things like product features, customer segmentation and costs of customer acquisition. While scaleups have already proved that their units are economically feasible.
To state in simple words these are like two students. One has come unprepared to the school and has not done his homework. This is the startup kid. While the other one has done his home and has also at least read the chapters what the teacher is going to teach. This is the scaleup kind of startup.
Another big difference between startups and scaleups?
More a company advances, greater will be the risk-aversion.
When you have an unproven product with a small customer base with no market traction, there is no fear of loss. It will make you to come up with an innovative idea.
This is the startup and this is the reason why startups take chances, accept the dare and could also take a step which might give them a leap. They are also eager to respond well and immediately to the incoming feedback and ideas and this could be the reason why some startups turn into scaleups overnight.
Multitasking vs. Specific Role
In a startup, it is very common for team members to perform multiple tasks. At the time of hiring, they are selected to stick to a specific skill set and are assigned a particular role. But as the need arises, they are also expected to take on other challenges and tasks which might be beyond their skill-set but are such that they could also perform.
As a startup transitions to a scaleup, team roles narrow down and there is a specific guy or gal for a specific task. Therefore, it becomes necessary to hire specialist for each and every role as scaleups try to focus on expanding their growth curve.
Trial & Error vs. Set Process
Startups usually have very malleable systems in place. The process of updating an application, drafting an email marketing campaign or replying to customer emails look different every time. The team members are also provided the freedom to try out different methods till the time they find out what is the best method.
Ultimately, they are also asked to make a proforma and enter it into the system so that can be easily reused by for the purpose. As startups transform into scaleups, organized systems become vital to complete projects on time and with maintaining quality.
Changes in Management Hierarchy
The leadership required for a startup is completely different from a scaleup. In simple words, more people you hire, the more people you will have to direct. When there are more departments in an organization, margin of error increases while shifting projects from one department to the next.
If you fail to overcome these challenges, you will have decreased production and reduced turnover. For the same reason, scaleups generally hire new leaders with experience of corporate management. More the number of managers supervising metrics, quotas and procedures, the more successful founders will be in taking the company to greater levels.
Process of Onboarding
Scaleups don’t expect new employees to immediately give their contribution on day one without going through on-boarding process. In the case of startups, the founder of the company might personally come and show the new hire his workplace and say, “Here is your seat…Here are your objectives…Now start working!” But the approach changes completely when team grows in a scaleup and reaches 50.
Without a doubt, early hires have the advantage of spending considerable time with the founders. The team is so small that they all have a very firm understanding of what everyone does.
To keep all the employees equally involved in the organization, scaleups generally provide new joiners with a crash course in all departments about business goals and company values.