Differences between startup and SME (+ examples)

Still don’t know what startup is? You want to know if your company is a “Startup”, read this article and you will have no more doubts. This call to startup companies and SMEs has raised some doubts in the average entrepreneur. Are startup companies and SMEs the same? Are all tech companies startups? The answer to all of these questions is no.

Don’t despair because in this article we will define once and for all what startup is. Before going deeper we have to start at the beginning and although it’s a bit theoretical and annoying, it’s necessary for our area of ​​interest.

And of course the principle is to define what a startup is.

What is startup?

What are startup companies? They are companies that just start to “start” and because they are born at that time they can have a technological base. This is the first characteristic that distinguishes a startup company from an SME.

How do startups work? In general, startups work with people from all over the world and you can work from anywhere.

They are characterized by being companies that grow and usually start with a few people (though not always). But the most important thing is scalability.

Startups don’t need a building or office to function, startups almost always operate from the same houses as the entrepreneurs, from a colleague’s garage, etc., for example how Apple started.

And those who consolidate and decide to change their premises are looking for startup offices but with an innovative decoration. This promotes creativity, coworking etc. There I found this article: The 9 most welcoming Spanish startups. You might get inspired when you need to decorate your offices.

To call yourself a “startup” you have to be an innovative company.

Iinstagram and Face book They started out as startups, but that doesn’t mean the only way to become one is to invent a social network.

There is no better way to make things clearer than using real life examples. Let’s clearly see how a startup differs from an SME.

Let’s start with the example of what a startup is

EchoPro is a recognized advertising agency based on conveying an ecological message in its ads. It was born from the merger of a group of young entrepreneurs with experience in audiovisual media and advertising.

Eco pro provides:

• promotional videos.
• product catalogues.
• photo sessions

These 6 young people decided to start their own business and they didn’t need more than the equipment everyone already had and they rented a small space next to the house of one of the members’ grandparents.

The place was a bit deserted but that was just a starting point. They thought it would be a great idea to design the site with recyclable materials and to start from the fact that they are an ecological advertising agency and stand out from the crowd.

Their advertising on social networks began with a self-made video in which they invited people to an advertising conference. Interested parties had to leave their details so that Eco pro could send them the relevant information.

Several companies with ecological products wanted to be advertised by Eco pro.

Eco pro is an innovative company, it went through its first stages with difficulties (as all companies usually do). It uses technology to power itself, it started with very few people in a small place, but it had great opportunities for growth, and it actually did. All these qualities make it a startup.

Now let’s look at another example of a startup

A close example, my vintage clothing store, the idea of ​​a vintage clothing store came from my mother and I when we saw that it was becoming fashionable in our country and there wasn’t much competition.

We opened a small shop, the suppliers were more than “suppliers” friends and relatives who wanted to sell their clothes and that’s how we started.

The advertising consisted mainly of word of mouth. Some events we did in other places to promote the store and from time to time we did deliveries flyers.

My vintage clothing store was advertised in a traditional way, we’re not something completely innovative. But we’re still a startup because we’re starting.

Benefits as a startup

Being a startup has its perks, let’s find out what they are:

Personal relationship with customers:

The fact of being a startup allows you to strengthen the relationship with customers more than other types of companies.

We know that the basis of any business is customers and there is nothing better than maintaining a personal relationship with each and every one of them.

Not only because this guarantees their loyalty to your product, but you also meet what the current consumer wants and needs.

So when you nurture a personalized relationship, you can provide feedback, giving your customers what they’re asking for.

Innovation:

What could be better for a company than to be “innovative” and startups are usually companies with innovative ideas.

The upside is that a startup’s work team is generally creative and willing to strive and improve. That’s why they decided to start one, because if they weren’t that kind of people, their idea wouldn’t be a startup.

So this working team will be constantly looking for innovations.

Fall down and get up:

There are statistics that show that 50% of startups fail in the first years of life. And that’s because there are certain myths surrounding the founding of startups, such as that success comes overnight or that they are immune to failure. I recommend this article over 10 reasons why startups fail.

It’s a long road to make a startup successful. The upside is that it’s not really a failure, it’s a learning and one more step to success. Check out this infographic on the steps to create successful startups:

Advantage when making decisions:

In general, decision-making in companies that are already consolidated is a laborious process, since it consists of the study and approval of several people. Especially if there is a board with many members.

In startups, decision-making is much more efficient. In general, the work team consists of few people, which makes decision-making almost instantaneous.

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start-up grants

It’s not a myth that startups in general have different types of help; as financing for startups or investors for startups.

In other words: venture capital, startup accelerators, public corporations and my favourites Angel Investor * inside.

And what are these wonderful things? easy. They are wealthy people who decide to put a lot of capital into a startup with a future.

Of course, these angels are always asking for a piece and stake in the startup they are funding. They are usually friends, family or weirdos. In English the three “F” (Family, Friends and Fools).

Why crazy? Well, for an angel investor, sponsor or accelerator, investing so much money in an idea is a big risk.

The seed financiers, who decide to provide start-ups with a lot of capital in the idea or initial phase, are not satisfied with this.

I found this infographic that illustrates very well who are the main investors in Spain and in which moments of entrepreneurship they appear as opportunities for your startup.

While this sounds very wonderful, when starting a business, don’t focus on the idea of ​​meeting one of these angels, if you find it, fine! and if not, keep working hard because consistency is what will get you far.

But as I said, an investor or business angel is not necessary for a startup to be successful. Many startup companies have found success without this.

Let’s get to know the example of Basecamp.

What is Basecamp?

It is one of the most widely used project management software in the world. It was founded by entrepreneur David Heinemeier Hansson.

And guess what, Basecamp didn’t need investors. This software is affiliated with a web company owned by David Heinemeier himself, which succeeded simply because it was an innovative idea.

What I mean by that is that while the idea of ​​a fallen investor sounds very wonderful and effective, it is not always the way to go, nor is it necessary to be a startup.

I think that you are already pretty clear about what a startup is and surely you would like to start one, if so tell us what you would like to do, what questions you have and if you already do it, how are you doing it .

In my next article I will talk about the types of startups, don’t miss it if you are really interested in starting one.

Would you like to read more?

Lean Startup, a business model tailored to you.

How do I start a business? – Compilation #1.

The 7 moments to develop your business plan.

How to write a business idea.