What Are the Differences Between Startup and Scale-up?


Startup and scale-up are among the concepts we frequently encounter in business life. Even though they seem similar, they differ in terms of their meanings and scopes. So, what are the differences between a startup and scale-up concepts? What makes them different from each other?

What is Startup?

Companies that are newly established as a necessity in the market, generally in the technological fields, and with growth potential are called startups. The initial stage of the startup business model is considered high risk and has no guarantee of success.

What is Scale-up?

As the name suggests, scale-up refers to a more developed startup. Here the critical point is the criteria that a company requires to be considered a scale-up. For instance, a company should grow more than 20% in the last 3-year period as a scale-up business model company. 

Differences Between Startup and Scale-up

As can be understood from the definitions above, startup and scale-up concepts represent different business models. When it comes to the distinction between these two crucial concepts, many criteria are remarkable. We can list the 5 outstanding criteria below:

1. Product-Market Fit  

The biggest difference between startups and scale-ups becomes obvious in product-market fit. Startups still encounter uncertainties about the financial returns and their product or service efficiencies. They learn with trial and error method whether something works for them. In contrast, scale-ups have already perfected their products or services and maintain economic sustainability.

2. Funding Phase 

Startups and scale-ups have different scales, so their funding phase also differs. Startups start with almost zero capital or no capital, scale-ups can receive their second round of funding, and they are in a more secure position in terms of finance. Scale-ups are also more likely to be preferred by investors since they provide a more secure and prestigious condition. 


3. Risk Aversion

As we mentioned earlier in the definitions above, startups don't have much capital since they have just started, so they have much less to lose in case of high risks and potential financial hazards. Meanwhile, scale-ups work on a base that has already been built up and developed. Their focus should be on protecting the products or services. 

4. Management Hierarchy

Both business models need a good management team to direct and accelerate the growth process. Here, we encounter a key difference. Startups typically have one to three people in their small management team, whereas scale-ups need an expanded management structure since they work on a bigger scale. 

5. Role Distribution in Team

Since startups are newly established, fewer team member numbers are sufficient to handle every task by each team member. Role distribution is not specified yet in startups. The focus point here is to save capital from hiring expenses in the foundation stage. Meanwhile, there are expert recruitments for more specialized positions in scale-up business models. For example, scale-ups can establish a separate department for subjects, such as social media, and hire more. 


A Brief Summary

Despite the similarity between startup and scale-up concepts, they clearly show differences in fundamental points. The trick for distinguishing these two concepts is to remember that startups are newly established and therefore work on smaller scales with fewer team members. That also means lower capital and risk rates.

BTM provides numerous services for companies with commercializing a new business idea and supports them with their growth procedure. We have introduced you to startup and scale-up concepts and their main differences. Don't forget to check out other BTM content for more information you can apply to your company and business model!  



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