Startup has never gained as much traction as it has now. At least 100 million businesses are created every year, that’s 11,000 businesses each second, with a good fraction of them being startups.
It’s worth knowing that there is a difference between a small business and a startup. Oh, pardon me, there are actually a number of DIFFERENCES. In most parts of the world, the term, startup is not as really popular as it is in Europe and America. There is also a misconception about it. A lot of people think it is another word for small business.
But it’s not.
The differences between the both of them can be summarized under Vision and Funding as enumerated by Silicon Valley entrepreneur, Steve Blank in this 3 minutes interview.
According to the U.S. Small Business Administration (SBA),
A small business is an “independently owned and operated, organized for profit, and not dominant in its field.”
The focus is profit. Anyone who establishes a small business wants to be his own boss. He has a goal of being financially independent and possibly to drive the business unto becoming a large company. A small business can be a grocery store, restaurant, salon etc. It’s not really something out of the blues.
On the other hand, a startup founder doesn’t just want to be his own boss, he wants to establish a scalable entity that is founded upon an idea which has probably never been tapped into or which is already existing, but is being improved upon by him. A startup creates a new market of its own or simply draw customers from an existing (and most times monopolized market) to itself.
Simply put, a startup is not just profit-oriented, rather it has a vision to solve problems. Its founder sees a problem in the society, he thinks of an idea to solve the problem and sets it into motion. He can spend years working on that solution until the profit will start trickling in.
In Steve Blank’s words,
A startup is a “temporary organization designed to search for a repeatable and scalable business model.”
This definition tells a lot why startups may fail. For instance, Facebook was a startup. It was experimental. Even though Zuckerberg had a vision for it, but no one thought it was going to be successful. He worked on the business idea until it graduated from the temporary entity at Harvard to a large conglomerate that the whole world can reckon with today.
Although, the owners of a small business and a startup are both called entrepreneurs, nonetheless, the eventual funding of both are different. While both of them are funded basically by owners’ savings, family, friends, loans and entrepreneurship development programmes, startups get much more funding than that.
When proven to be successful and viable, startups get more funding from venture capitalist, angel investors, and eventually, an initial public offering (IPO).
With each additional funding, the startup founder’s equity is eroded, while ownership of the company diversifies. At the end of the day, you’ll see a number of people having shares in the company.
Trust me, a startup idea is beyond one man. You might have been the owner of the idea, but the vision itself has the capacity to attract everyone towards you.
On the contrast, a small business owner will scarcely want to share the ownership of his business through initial public offering, that is understandable though. But its growth can never be equated to that of any company owned by many investors.
Internet entrepreneur, Mark Zuckerberg as at 2017 had a net worth of $74.2billion but his baby, Facebook is worth $501.64billion. It’s obvious he just owns a percentage of the internet conglomerate. It is no longer about him. People keyed into the vision and took it to the level it is today.
So the fact that you started a business that has made a profit of $10,000 in 3 months doesn’t necessarily make it a startup. Don’t get me wrong, startups can make huge profit almost immediately too, but profit is never the primary focus, rather it is a forceful domination of the world.
Further Misconception About Startups
Away from the difference between small businesses and startups, there is another misconception that is masquerading itself around people’s understanding of startups: people think that startups are for the tech savvy only.
Such a misconception is inevitable since the greatest percentage of existing startups are tech related. By “tech related,” I’m explicitly referring to computer, softwares, automation, Internet of Things (IoT) and stuffs in that cadre. One can barely do much without a basic knowledge of computer, but to assume that you must be a computer guru before you can conceptualize a business idea, is an error.
You don’t need to know a thing about software or programming before you can think up a crazy startup idea. The most basic thing you need is to identify a problem, and think of a solution.
The world will be very boring if everyone know everything. During the development of the idea, you can always introduce tech savvy guys if the idea needs one. However, it is important for one to be knowledge-grounded in whatever startup direction he is headed.
Why You Should Start A Startup
1. You Know You Have More To Offer
Vision is more about what you have to offer, it’s a fuel for startups. No one should think of startups if he has got nothing profound to offer. Most people feel a high level of discomfort with the status quo. Same for me. I’m working on a number of startup ideas, and I’m so passionate about them because I really need the world to see something they’ve neglected for centuries. I want to fill a gap and provide solutions to issues that are significant in my area of focus. If you’ve got that same desire, then you need to start a startup.
2. A Traditional Job Is not Secure
When you check the odds of succeeding at startups, you might get discouraged, but if you check the rate of unemployment in the world and the number of laid off workers over the past five years, you’ll discover that it is best for one to go into what he is passionate about. Traditional or white collar jobs have zero job security. One can be laid off anytime with no apology. Why not dedicate your time working on something you believe in?
3. The Capital To Grow Is Widely Available
There is high concentration of interest on entrepreneurship around the globe. A lot of entrepreneurship foundations are giving out seed capitals and grants to young entrepreneurs regularly. As long as you’ve got a viable business idea and you’ve got the paper works to show, you can be rest assured that you can get a seed capital or grant in less than 6months. Foundations like Tony Elumelu Foundation is giving out $100million dollars to African entrepreneurs within a space of 10 years. African Entrepreneurship, and Nigeria’s YouWin are just but a few of these sources of capital for your startup once you are ready. A regular update of such programmes can be found here.
4. Access To Infinite Knowledge On Your Startup Focus
Apart from when the world is going to end, there is no other information that you can’t find on the internet. The Internet has totally removed the limitation to the measure of knowledge that one can access in his lifetime. Through online courses, YouTube videos and millions of dedicated blogs and online repositories, you can access all the information you need to develop your startup. The beautiful thing is that you can develop yourself at the comfort of your bedroom.
5. You Will Be Your Own Boss
You’ll certainly have the entire time to devote to your passion. Since you are your own boss, you can make the decisions yourself including decisions on the kind of clothes you wear. No one will have to subject you to knotting a rope, (sorry tie) round your neck everyday. All you’ll be concerned with are productivity and results.
6. You Will Finally Have The Power To Change the World
Have you ever had that feeling about changing something in the world? Well, you can’t change the world by sitting on your sofa and day dreaming. Those who change the world need ideas and dedication to see them through. Starting a startup brings you into this league. You never can tell how much you can influence people’s lives until you try. Your idea might be the solution to the problems of your country, and until you rise to act, the world will remain in shambles while she waits for you.