There is a difference.
It’s so finite that you might not even think it’s relevant. It’s easy to miss. And easy to ignore.
Side note: please accept the interchanging use of ‘startup’, ‘start-up’, and ‘start up’. Suffice to say even that hasn’t been clearly defined and I’m not one for grammatical accuracy at the best of times.
So, what is a Startup then?
There’s some confusion (at least in Australian commerce) around what truly is the definition of a ‘start up’. Is it a business that’s starting up or is it a project/idea – usually in the technology sector – that hasn’t yet progressed beyond the seeding/capital stage into scale/growth with a solid business progression plan?
“A startup is a very distinct thing. A startup may turn into a small business, but it doesn’t start out like one and therefore has to be supported and encouraged in a different way. Startups are high-growth, high-risk ventures that set out to find a scalable business model in a large market.”
I would add that a startup also doesn’t kick off thinking it’s going to be a big business either. But it does want to make an impact and disrupt folk.
From my experience working with both startup’s and businesses starting up is that it really comes down to your attitude to being in business and your understanding of money.
Startups usually don’t have money, hence being high risk as Handsaker described. When a project/idea reaches the point of pitching to venture capitalists and the like, it usually comes down to someone having a hunch on the idea and using their business experience to determine whether it’s a viable project worthy of investment. There are thousands of examples where that hunch has ultimately been wrong. I believe that’s because startups do not start a business. Most founders know nothing about business management or operations and they find out way too late in the game to catch up.
Most times, startups are not in the business of being in business.
Huh?! What do you mean we’re not a business, we’re making money.
Dude, it’s not the same thing. Just because you’re making money doesn’t mean you’re running a business. You can make money and know nothing about finance management, like the significance of a balance sheet or profit & loss statement. You can make money and not implement management strategies for your recruitment, or your processes/procedures. You can make money and make really stupid decisions about what systems to run your business on. Shit that ultimately costs a lot of money to fix.
Successful startup founders are usually good at the product/service creation and probably pretty good at sales too but they’re generally inept at management or operations.
What’s a business starting up look like?
A client of Your Third Hand Services hired us to help them with the fundamentals of starting their new business. They were three guys who’ve worked with each other on & off for years, all experienced in their industry but only one had solid business acumen. Not surprisingly, it was he who sought to hire us. Let’s call him Bob for the sake of easy reference.
In a Business Foundation Review workshop we analysed the business concept. We looked at the who, what, where, why, when and how of their future operations. We poked holes in their new business and forced them to discuss it together in a way they never had before.
The fact that they went through this process at all is what differentiates them from being a startup. Startups do not do this analysis. Usually startups don’t know what they’ll ultimately be selling. Several pivots or iterations later and they could have a completely different product/service. Likewise, they might call each other co-founders but that doesn’t mean equal partnership when you do finally become an incorporated business.
Not Bob & Co. They knew exactly what they wanted to sell and they knew they were going to be 33.33% equal (I’m ignoring the 0.01% for obvious reasons right now). They also had their own capital to invest. They weren’t reliant on venture capitalists, or crowdfunding, or the lottery. They had the cash. Admittedly, not all businesses starting up are quite so cash-blessed. That’s where bank loans or the equivalent come into the equation.
A business starting up should complete (but rarely does) a Foundation Workshop before they put cash on the line or sign the compliance documentation. But Bob knew it was essential. Bob & I had plenty of A-k Accountability sessions nutting through the results of the workshop. Having someone outside the business to hold them accountable ultimately challenged the commitment each partner had to the new business and resulted in one partner pulling out.
Bob & Co. had the attitude that they were going to operate a service business and the understanding about money that is required to grow their business. A startup cannot possibly know this from the outset.
So I’ll ask you again, are you a startup, or are you a business starting up?
If you’re the latter, contact me to be certain your foundation is rock solid before you lose a shitload of cash.
Your Lead Shizzer signing off,