Recently, read an article on the difference between a ‘Startup’ and a ‘Business’. Hence, thought to share some of my views about this.
We see that many people are intrigued with the concept of ‘Startup’. It has almost become a buzz word, or a so called trend these days. Legends of the startup world include famous names like Steve Jobs, Elon Musk, Mark Zuckerberg and many more in the world of Tech and Silicon valley. Many people get inspired by such famous success stories, and decide to start a startup and thus, venture out into the world of entrepreneurship ( which involves venturing out to the Venture capitalists (VC firms) to ask for funding.)
But not all succeed in this brutal competition and survival race in the startup world. Its said that almost 90% startups fail in their first few years, and many even never make a profit. Which in other words, leads to loss of money invested by the investors or VC’s. And the founders lose the credibility for any future startup funding, and many worse things might follow up. So, its important to know what exactly is a startup and how does it differentiate from a business?
Startup can be defined in simple words, as a project undertaken with an innovative idea to scale a business model ( which might be new or existing) driven by technology ( which mostly includes new age tools like internet, AI etc) and thereby create a disruption in the market and gain considerable market share. So, the overall aim of the startup is not only to make a profit, but also disrupt the existing models of business or market. It might take years to develop the technology, and even penetrate into the market. Which means it is possible that the startup wont make any money for initial few years, will have to render its services for free to the customers ( like Facebook and WhatsApp does) and will be dependent on the investor funding fro VC’s.
But a business on the other side, is a project undertaken with an aim to make profit immediately by giving services or selling the product manufactured, using industry defined technologies, and thus paving the way to capture the market share. A business has a model, which is often designed such that the business will start making money as soon as possible. It does not disrupt the market, but often earns enormous profits in a well stabilized market. Also, a business can be small or big, and unlike startup, which always aims to bring in innovation, a business might not promote much innovation and can rely on the well established processes and methods. So, in short, a business might not disrupt or not even change the market which startup often aims to achieve.
Lets see this with a simple analogy. It is often said, that when life gives you lemons, better make a lemonade!
Well, does making a lemonade and selling to the customers can be considered a startup?
The answer is No. It comes under business, because its a standard way to provide service to the customer, which here is making lemonades. Now, if we make really good lemonade, then people will appreciate it and our revenues will skyrocket with the fame. So, business will grow, and we might even open our business in different locations in the city and across the country. Still, its a business. Afterall, no one calls a McDonald, or Starbucks or even Papa Johns a startup! Even though it does dominate the market share, but it doesn’t disrupt the market as there are many lemonade makers in the city( just like many pizza or burger makers) and they can also follow the same path.
But if someone design an app or any service to find the lemonade businesses in the city/country, connect them to the customers, and even make it like a home delivery ( like Zomato, Swiggy, Grubhub etc does) then its a startup. Why? Because now they can easily disrupt the whole market by rapidly scaling, and connecting with the local lemonade businesses, and using technology, its faster, better, easier and even more feasible to expand and scale. That’s why we see so many startups have risen in almost everyday businesses, like food industry, tourism( Make my trip), entertainment( Netflix), cab services (Ola, Uber), education (Byju, Unacademy), Online courses (Coursera, Udemy), accomodation (Airbnb, Oyo) and many more.
But just like any one can make a lemonade and start his/her own business, similarly anyone can make an app or website and enter this space. So, the competition is fierce in the startup world. Many times, those startups which have a lead, or a better funding VC, and even those who expand rapidly have a chance to survive in this brutal race. In the initial years, many players emerge and compete with each other, But then eventually, many die out and finally, only one or two succeeds to stay alive. We see this happening in social media world, where Facebook had competitors like Orkut, Google had Yahoo, Amazon had Ebay. But today, they are the only remaining monopolies.
Infact, the startup world is so uncertain and risky that it is difficult to know which company will survive and expand, or which might even die out. Many experts never thought that a social media friends chat wall like Facebook will become so big someday. While Tesla and SpaceX also have surprised everyone considering the huge cost and meagre success rate it had in its early years. But at the same time, did anyone predict that an extremely good looking entrepreneur like Elizabeth Holmes would start a medical startup Theranos on a fake idea and it would result in a complete disaster for the VC’s and even the entire health industry. Even WeWork had once given a hope of becoming the next billion dollar company, but it also eventually fell apart. So, this world is full of uncharted territory!
Below pic shows the failed startups like Theranos and WeWork
While below are some of the most successful startups in the world
Finally, its always a good thing to start a startup because it promotes innovation. It uses tech and that whats makes it much easy and efficient. We all have been using Amazon, Uber, Zomato, Ola, Netflix. All these startups had an idea, which later became the billion dollar idea. They helped people by providing better service, better technology. Our life has changed by this startups enormously, where today, it is possible for a person to connect with his old school friend after a long time using Facebook, calling him/her using Messenger or WhatsApp without any distance barrier, meeting him/her in a new city by booking an Uber or Ola and using Google Maps/Navigation to reach the location, ordering some gifts from Amazon on the way, enjoying food delivered by Swiggy or Zomato at the doorsteps, then having a good time watching movies on Netflix and finally posting the nice selfies and GetTogether pics on the same Facebook or Instagram Wall. The world is Round, indeed!
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