Most people think that a startup is a former small business. In fact, a startup is quite different from a small business. Building a small business may take more effort and money, so does the startup. Both startups and small businesses have their own obstacles. Therefore, you need to understand the advantages and disadvantages of having a startup or a small business. Basically, the differences between a startup and small business can be seen based on raised funding, growth expectation, and initial focus business. Let’s look at this article for further details.
Funding is an essential part of the business. Startups and small businesses have different ways to earn the amount of money for their business continuity. Startups are often backed by venture capital groups. But it is not simple to have venture capital. The startups need to present their unique business for the market. Each startup may have different funding sources, it depends on the venture capital and their capabilities. Looking at the small businesses, they don’t need a venture capital to fund. Small businesses founders usually have a bank loan, alternative lenders, and joint venture.
Startups have an essential need for rapid growth because it influences the next investment they will have. Startups always capture the percentage of their target market that has been achieved. It can be a parameter for startups to have rounds of funding. Successful startup companies don’t have a net profit at the beginning of their business, but they have many rounds of funding after they become established. small businesses also seek growth. Unlike startups, small businesses need to ensure costs and expenses remain low because there won’t be further ‘rounds’ of funding available to them; loans need to be repaid with capital and there aren’t many second chances to do so. On the other words, a small business employs a more recognisable, traditional business model.
The startups' main focus is to have revenue and growth. Startups need to go to the next level. There are some startup growth stages: pre-seed, series A, series B, and series C. Startups in the series A will work harder so they can have more revenue and growth and continue to the next series A. Small businesses don’t have growth stages as startups. Thus, they focus on the revenue and profitability to return the loans.
In sum, what startups need is not what small businesses need. Both of them have different objectives and fundamentals. However, startups and small businesses have the same goal. It is revenue.