Startup vs Corporation: A Guideline to Which Is Which

By Mohamed Ghazy
2021-04-16

In the recent past few years, the term "startup" has begun to create a bigger echo. You would find startups all around you, rapidly rising and sometimes rapidly falling. The term is no longer strange nowadays. As startups have become the new golden model for fast business, corporate life as we know it might be changed.

A company or an enterprise in the familiar sense shares many characteristics with a startup, however, there are key differences that separate both, and of these key differences, we are going to highlight speed, scale, and stability.

But before jumping into comparison, let's shed some light on the definition of a startup.

A startup is an early-stage company; one in its infancy. It is usually a project based on an idea from a small number of people (who are usually the founders) with not that much money to begin with, but enough to kick-start the endeavor. The founders are responsible for as much money as they put in; they lift the whole thing on their shoulders. The real capital here is the idea in question.

And it's quite the risky business, to be frank, because 9 out of 10 startups end up failing. The margin for success is not that large in startups, especially given that startups usually aim for innovation and creation of something that isn't already in the market. So it's jumping into new waters with little money, and little to no guarantee that you'll survive the market unless what you're bringing to the table is an idea that would substantially change the market.

How do startups survive, though?

Through venture capitalists and angel investors, that is.

To put it simply, both are investors, both are pouring money into the project, the key difference is that venture capitalists seek viability and profit as the number-one priority, while angel investors invest more not in the business itself, but into the founder of the business. More on that in future features.

Large corporations, with emphasis on large, do not manage like that. Raising capital in a large corporation usually starts with an IPO (Initial Public Offering) through which multiple investors join the boat. For such a business to take place, pouring investments happens after studies have been made and every step has been taken into consideration, which makes sense given the vast amount of money to fuel the process with comparison to how a startup starts.

Given the previous, it is guessable how both startups and corporations manage regarding the following:

·         Speed: Business moves much faster at startups than in corporations. Corporations are not simply idea-based; they take much more time to be established, unlike startups that happen in a much more condensed timeline.

·         Scale: Startups are small by nature, whether they grow into something gigantic and become a unicorn or not, the phase of being a small business is unavoidable. Corporations have to start big or otherwise the very project set to take flight simply would not be able to do so.

·         Stability: Naturally, startups are wrapped in uncertainty and change by the hour. Things could go south fast for a startup if, for example, the customer satisfaction they provided was no longer relevant to the current market. Corporations are established after extensive studies and are not so gravely affected by minor shifts in the market because they usually satisfy bigger needs in said market.

In this day and age, mega-corporations like Facebook or Airbnb started out small and found their way up. Business has become even less linear than ever and the market is in a constant shift and turn to suit whatever new needs might arise. It must be noted, though, that the aforementioned examples are not to be considered the normal standard, but an exception to the rule and a product of innovation, and that the normal model for big corporations would not just vanish in a fortnight, but to survive in the market nowadays, entrepreneurs have to be faster and more innovative than ever.