Today we discuss about the differences between a startup and a small business with Cristian Badea, co-founder of Sypher. Cristian was involved in founding two successful eCommerce platforms: Gecad ePayment and Avangate and also part of the successful RAV Antivirus team, technology which was acquired by Microsoft in 2003; ePayment was acquired by Naspers in 2010 and then became part of PayU and the third was acquired by investment fund Francisco Partners back in 2013.
Q: Startups are very popular these days. Startup founders are spoiled with different opportunities: growth programs, competitions with prizes running from mentorship hours to cash prizes or events to gather investors’ attention. But what exactly is a startup? Is every new company a startup?
A: A startup is basically a number of people getting together full time or on their spare time, trying to create something innovative. It’s whether about product (what?) or user experience – a new disruptive way of using something already existent (how?). In my opinion, a startup is intrinsically related to innovation. Not necessary in the technology field, but definitely innovation.
Q: Can we consider a company a startup if it innovates at distribution or marketing level?
A: Not really. Marketing should be innovative by itself. Applying pioneering marketing techniques doesn’t make you innovative as a business, hence a startup.
Q: When do you know a company is no longer a startup? How can you tell it made the step to the next level?
A: First of all, let’s see what next level means. For a startup, next stage could be: either fail – yeah, that’s an option, even though most of entrepreneurs don’t want to think about it and they should – or become a small business or a corporation.
Q: Usually for how long can a company be a startup?
A: You see, in tech business there is no steady business. You simply cannot be a startup forever, you need to innovate, or you die. Innovation ultimately means growth. And when you grow, you’re no longer a startup.
Q: But isn’t B2B segment less prone to innovation?
A: Partially true. In B2B the change rate is slower until something disruptive comes up and changes the rules of the game.
Q: So, growth. But how much you need to grow until you’re no longer a startup?
A: Well, there are a few indicators we can look at. Size, for example, the number of employees. The heaviness of an organization translated in processes and people involved. Organizational culture and the principles around which this revolves. And last but no least: the ability to pivot.
Q: Can we please detail this last one?
A: It’s a pretty simple test: if you’re flexible and versatile enough to quickly pivot to another niche and get new clients, then you are a startup. When you’re stuck in an area which no longer fits your initial vision you became something else.
Sypher Talks. Monthly discussion focused on entrepreneurship and GDPR featuring top notch specialists in these fields.