Unfortunately, people use the word “startup” as a synonym for “business” or “company”, when in fact they mean different things. So in giving advise to startups (especially in Nigeria), entrepreneurs should first know this difference I’m talking about.
An innovative business or company is NOT really a startup. I once worked with a guy that kept insisting that his company was a startup, whereas I saw it as a small business. This pushed me to really research this word that people so easily throw about.
What really is a startup? Look and ask around, you’d get different definitions. But from all research, a startup (in simple terms) is AN EXPERIMENT. The purpose of a startup is to discover a new business model that could be scaled into a profitable business. That is the sole purpose of a startup.
Was Uber a startup? Yes, they proved that the on-demand taxi hailing business model works. But is Ola a startup? I don’t think so. I used Ola cabs when I was in India earlier this year. Ola cabs in an Uber competitor in India. After Uber has proved that this model works, Ola and the others took up the already proven idea. Therefore, Ola cab is no a startup, by definition. They’re just another company, and maybe innovative at that.
The innovation comes in where they’re able to improve on the existing business model. But that’s an improvement, not a new business model, not a new experiment, and therefore not a startup.
Many businesses get lost on the wrong track, classifying themselves as startups, whereas they’re just another small business trying to improve on an already proven business model. Remember the guy I worked with, who kept calling his business a startup?
Whenever startup challenges and competitions came up, he would apply for them and I was usually a part of this application process. Time and time again, we would come across fundamental questions that true startups should be able to answer. But guess what? He couldn’t answer these fundamental questions, more often than not.
With each application he completed, the more I was convinced that his business was just another business, with each failure to answer these fundamental questions. Typical questions were: what differentiates you from the other? or How’s your business model different from what already exists?
What differentiated him? Not much, or nothing at all. What new business model was he using? The same that everyone else was using. And during one of the startup events, one of the judges had to ask him “why are you doing this?”.
Initially, the question sounded ridiculous, but after watching the other contestants (some of whom were true startups) do things never done before, I had to ask the same question too… WHY are you doing this? Trust me, things would have been a lot different (better) for that friend of mine if he took his company like a regular small business with an innovation improvement to an already existing (and proven) business model.
I believe that understanding this fundamental difference between a startup and a small business is essential to the existence (and possibly success) of many business entities today.
I run a small business, and I know clearly that it is not a startup. Do I have innovative solutions and different ways of executing the already proven business model? Yes. But does that make it a startup? Certainly not. And so knowing that my business is not a startup, I hardly ever get carried away with the hypes and news of what true startups are doing. I am not looking for investors and co-founders, or fancy offices.
Like one guy I knew who spent a bulk of his capital (which was a loan) in setting up an office, trying to look as cool as Google. He failed to realize that when Google was at the stage he was back then, they were still working out of a garage. Google today has taken decades of handwork and bootstrapping to get there. They did NOT start like this. So many entrepreneurs fail because they compare their 5 years of work with Google’s 27 years of work.
Clarity, they say, is bae. And if I’m wrong, then we’re all just startups lol
Now it’s your turn… what’s your opinion about startups vs small businesses? Please share in the comments section below.