START-UPS VS SMALL BUSINESSES AT WAXDALE WE DO NOT AIM AT CREATING SMALL BUSINESSES OUR STARTUP IDEAS MUST BE SCALABLE.
This stands is in stark contrast with the definition of a small business, which is described as “independently owned and operated, organized for profit, and not dominant in its field. A “scalable” startup has the intent to become a large company
A STARTUP IS TEMPORARY
The organizational function of the startup is to search for a repeatable and scalable business model.
A startup founder has three main functions:
To provide a vision of a product with a set of features
To create a series of hypotheses about all the pieces of the business model: Who are the customers? What are the distributions channels? How do we build and finance the company, etc.
To quickly validate whether the model is correct by seeing if customers behave as your model predicts
A STARTUP IS FUNDED DIFFERENTLY
While both a startup and small business will likely start with funding from the founder’s savings, friends and family, or a bank loan; if a startup is successful, it will receive additional series of funding from angel investors, venture capitalist, and eventually, an initial public offering (IPO). With each series of funding, the startup founder’s equity is eroded, while ownership of the company diversifies.
Eventually, a startup may cease to exist as an independent entity via a merger or acquisition. To a small business owner, relinquishing control would defeat the purpose of running their own business; however, for the startup it may be necessary to scale growth.