According to different statistics, about 50% of startups survive the first 5 years, but only 0.5% become actual scaleups. These numbers clearly show that major, exponential growth is not achieved by everyone.
What are the common features as well as differences between startups and scaleups?
Although often used to define a type of organization, the terms “startup” and “scaleup” actually refer to company phases or growth stages, which correspond to different periods of their business life cycles.
A startup can be defined as a new company with promising future plans. It is still experimenting and creating real products or services that people need, discerning between “nice to have” and “must have”. Because of constraints in time, resources and cash, it is common for startups to put too little emphasis on marketing and sales / market.
Where a startup is still in the early stages of developing its products, analyzing the market and securing funding, a scaleup has already established its product in the market and is well on its way to accelerate its growth.
Basically, you’re a startup until you prove your business model. You’re a scaleup when you already have a proven model and you’re scaling your revenue.
While the startup is still exploring its potential and discovering in what way it can best present its product or service and to whom, the scaleup has already found its way and the direction to go. The product-market fit has been perfected by scaleups and when it comes to funding, scaleups can usually provide prospective investors with more validation.
But the main concerns of companies both in the startup and scaleup phases are often related to funding, hiring the right people and creating partnerships or collaborations with strategic industrial companies.
For startups, collaboration with an external network might not always be a must, but it can create a smooth transition from the startup to the scaleup stage by accelerating revenue growth and access to new customers, by decreasing the COGS, etc.
Furthermore, entrepreneurs should build a network of partners, like service providers, sales partners, suppliers, or customers. Partnerships between startups and corporates are important to achieve this.
Philippe Schlegel
UBS Growth Advisory