What’s the difference between a “startup” and just a new company?
In: Economics
Tmk a startup exists to be sold. It’s end is to become just successful enough to be sold to a larger company then abandon it
It’s mostly branding these days but a start up is typically a tech company that is funded by investors and intends to lose money for a few years while doing something innovative, risky, and new. Often a start-up isn’t designed to be profitable ever but instead get purchased by a larger company.
So, if you just open a store (online or not) selling t-shirts or candles or whatever, it’d be a small business. It’s not a new concept and you want to make a profit from day one.
If you invent some cool new tech but the business model isn’t clear, you’d be more of a start up. An example of that might be if you came up with a new way to detect SPAM. Is it a business? Not really. But investors see it could have value if Google, Microsoft, etc. see the potential. So, it’s a start up. You (and your investors) eventually want to make money but maybe the end-game is being bought by a bigger company interested in your technology or patents rather than just selling a product to consumers.
That being said, “start-up” became a trendy term and every company looking for investment said they were one. So, the distinction is blurry nowadays.
As others said, there’s no strict definition. Personally, I’d say a startup is a new company that intends to grow very quickly.
I’ve always understood a startup to be a new business in a novel field. The sort of companies that dream of being “disrupters”.
Start-ups are companies that are entering young or non-existent markets. They have the potential for enormous growth, but also a high chance of failure.
Because of that they don’t get capital investment the regular way, like bank loans, but instead use venture capital or crowdfunding.
They usually start off very small, developing a product to sell in the first place. This period is the most difficult one, since they only run at a deficit and if they run out of capital or can’t find new investors, before finishing the product the start-up fails.
Examples are SpaceX, Rocket Labs or Virgin Galactic in the commercial space sector. This is a young market, merely a couple years old. They have to develop a lot of rocket technology, but will be worth billions if they succeed in the long term.
Then there is creating new markets, like carbon capture. There is no viable solution to carbon capture at the moment, but many start-ups are trying to find one. The first one to do so, will be rewarded with a lot of contracts and money.
Yep, there’s no strict definition, but “startup” is typically a tech-forward company focused on fast growth and disruption.
Example. You love baking so you decide to open a bakery. You are starting up a bakery, that is a business, but no one would call that a startup. If, on the other hand, you found a company that buys a bunch of storefronts across different cities and then connects a bunch of cottage bakers in those areas using the Internet in order to stock those stores with bakery products, that’s a startup.
Financials: A startup doesn’t have any income. A company does. A startup has a bunch of capital to spend, donated by rich dudes and their friends. A new company is more focused on its revenue to pay wages.
While other responses are correct, no one is mentioning the **key** difference between startup and conventional fresh company (that also explains why most startups are tech related).
*Potential* for growth, or in other words, potential market size.
If you starting pizzeria, no matter how hard you try there is a hard limit on profits you’re gonna get from it. There is limited number of people you can serve, it’s just not feasible to drive couple hours just to eat **your** pizza. Sure, you can start in another location, but you need to rent it, hire new people – the costs increase linearly.
The startup is the idea for a business where with roughly the same resources you can potentially serve millions of people. With online services it’s just given (hardware is cheap and one server can *serve* thousands of people at the same time).
I’m late, but the best explanation I’ve read for the difference between the two is here: http://paulgraham.com/growth.html
The main difference is the possibility for rapid growth. That’s about it. Everything else other people are mentioning are sort of side effects.
There isn’t any exact line here, but generally speaking, if you want to start a new coffee shop, that coffee shop probably can’t grow 100% bigger every year, year over year, even under ideal conditions. Your shop can only fit so many customers before you have to get a bigger location or a second location, and that takes time to do. And once you have a second location, are you ready to double to 4 in the next year? double to 8? double to 16? Etc.. No, probably not.
A startup company in theory can. Startups don’t have to be tech companies, but being a tech company certainly makes it much easier to be able to grow that fast, because you’re just selling more software. Even a coffee shop could in theory do it this way, it would just have to have an innovative plan and start from the beginning with the plan for rapid growth and expansion. Most ppl starting a coffee shop don’t do it like this.
Startups exit the startup phase once they’ve squeezed all they can out of that “rapid growth” period.
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