Growing up, we often hear a lot of household names such as Google, Facebook, Walmart, Microsoft without really knowing what they are. Big corporations have been so deep-rooted into society and people’s minds that we do remember what these companies do but stopped thinking about their impacts on society.
On the other hand, startups, though well recognized by people, do not get remembered as easily and are not as integrated into our societies. But, what is crucial to understand that both startups and big corporations are essential to the progressive improvements and growths of society with each of them providing different strengths, opportunities, and purposes.
Demystifying the Difference: Startup vs Big Corporation
Not all recently created companies are startups nor do they have to be. By definition, as coined by Steve Blank, a serial entrepreneur, and professor at business schools such as Stanford, Berkeley and Imperial College, a startup is “a temporary organization designed to look for a business model that is repeatable and scalable.”
While a company is “a permanent organization designed to execute a business model that is repeatable and scalable.” Therefore, the difference is that startups look for an attractive business model, while companies already have such a business model and are focused on successfully executing it. This distinction affects the nature and needs of both kinds of organizations.
Tanker vs Speedboat Analogy
To make it sound interesting and chalk out the differences easily, let us use an analogy of comparing big corporations to ‘the huge tankers’ and startups to ‘small speed boats’.
- The big tanker moves very slowly, is untouched by the ocean currents and waves, and hire a lot of people on board.
- The speed boat is agile, has a small team, and is capable of going far or be punished by the cruel nature of the sea.
Jumping off this analogy, let’s dive into the strengths and weaknesses offered by startups and big corporations.
Small team: The reason why you feel impactful in a startup is often that you are a part of a very small team. The average startup team can very well be within 10 people. So when you’re part of that team, you are going to be tasked with tasks that are very core to the survival of the entire team. It’s great to be impactful in a startup, but that also means that it can go both ways.
Always hustling: One of the most frequently heard things about startups is that they are constantly on the hustle. Such pivoting in fact is crucial for the survival and growth of the startup. For instance, Instagram which today is the most popular photo-sharing application was not one when it started. It incepted as a check application that allowed people to show people where they are. But, a series of pivots and edits made Instagram what it is today!
This is why it’s important to know that the final products of startups aren’t always what they set off to create at the very start. There will be new challenges and opportunities that will either evolve or destroy startups.
Offering innovation: Startups normally set off their journey as an entity that is trying to solve problems through innovation. Coursera and Udemy allow people to learn anytime and anywhere via their platforms. Venmo allows people to pay each other conveniently via their phones. Discord allows people to talk to each other as a team when gaming. Point is, startups always have their eyes set on a problem and they firmly believe that their products are the keys to solving these problems.
Low cash flow: Another important but disheartening fact about startups is their low cash flow. Another thing that is most heard about startups is they are always fundraising. The longer the runway is the more likely it is for a startup to take off successfully. That is why you often hear startups actively going through a series of fundraising. Startups won’t take off without the funds necessary. It’s great to have a dream of solving problems, but there are also harsh realities that one must face when doing so.
Huge Team: It is no surprise to know that big corporations are characterized by big teams. They offer more job security to people because of how big they are. Big corporations are not as likely to fail and go bankrupt compared to small startups because of their solid foundations, well-established relationships with the government and people, and board of executives that makes decisions together.
Doing similar things: As previously stated, big corporations tend to be more risk-averse. They won’t make huge pivots and conduct large scale company restructuring like what some startups may do. They focus on doing what they do best and substantially increasing profit. Companies like Walmart are still innovating, but what keeps it alive is the everyday process of selling household goods to customers.
Huge Pools of Funds: The biggest difference between startups and corporations is probably their amount of funds. Startups are always tight in cash flow and always looking for more. Corporations are always looking for profit, but a week without sales will not have as much of an impact on the company’s well-being compared to a startup. Corporations also have more funds to spend on things like advertisements, talent hiring, and opening up additional locations. Startups probably have to pick between hiring a sufficient engineer and running online ads for 2 months. That is the main difference. Startups have to be careful in every step they take while big corporations and more rebound for mistakes.
Coming back to the tanker vs speedboat analogy, you can treat big corporations as the tanker that moves slowly but never stopping. Startups, on the other hand, will be the speedboats that explore different industries, the newest trends, and disrupting industries drastically.
Uber disrupted the taxi industry without owning one car at all. Airbnb =changed the hotel industry forever by not owning any real estate. WeWork changed the traditional concept of working space through space sharing. Startups are constantly changing the traditional concept of things.
It is also a possibility that the two can work together. Startups are constantly being acquired by big corporations for their talents and unique value proposition. Facebook acquired Instagram, WhatsApp, and Oculus because it felt connected to what they were doing. Big corporations often treat startups as little R&D centers where innovation is created by constant failures and talented people.
Although startups and big corporations offer very different things, they both keep society moving and ensures progress through their constant engagement in revolutionary changes and their lookout for opportunities.
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