While startups and scaleups are often considered very similar businesses, there are some subtle differences to help you tell the two apart or if you are unsure how to define your own company.
Here, we have detailed how to tell whether a business is a startup or a scaleup and the critical differences between the two. However, it is essential to note that this is not a set criterion and does not apply to all companies.
How long has the business been operating?
One of the easiest ways to decide whether a company should be considered a startup or a scaleup is by the length of time that the business has been operating. Startups are businesses in the earliest stages of development that have only been up and running for months or a couple of years.
On the other hand, Scaleups have been operating for over five years. This means they have had more time to progress and establish themselves within the market and may have a clearer idea of where they are heading.
How many employees does the business have?
Typically, startups only have a few employees, which are all required to be adaptable and complete a multitude of tasks, even if they are not necessarily within their job description. Scaleups usually have time to acquire more than ten employees, each with a specific job role.
This can make each member’s role slightly more accessible as they have precise tasks and a more set day-to-day routine. Scaleups may also have more advanced processes in place, having already gained experience in their industry. For example, they may use voice-over-internet protocol (VoIP) to communicate with stakeholders or even have a bespoke tech to help team members and stakeholders communicate.
Scaleups usually also hire more staff because they are scaling up their company. This may mean expanding into new markets or offering new products, and the staff from the original startup team can, therefore, not handle the amount of work that the business needs to complete.
Scaleups will often also hire people with specific experience or qualifications for specific roles to help the company progress. This is not always the case in a startup, as business owners usually look for people comfortable completing multiple roles but do not necessarily specialize anywhere.
What stage of funding is the company at?
Many startups and scaleups are at very different stages regarding funding. Startups are usually at the pre-seed or seed funding round, at the very first stages of setting up their business, and looking for cash flow to get off the ground.
Some startups, particularly in the pre-seed phase, may even look towards unsecured loans and personal finance options or utilize savings just to get the funds they need to start the company.
Scaleups are more established and may have already completed these funding rounds to reach their stage. Scaleups usually complete Series A or B funding rounds as they reach the 5-year mark, although some companies can run this funding round while still technically be considered a startup.
Some businesses will require funding when they come to start any business, whereas others do not require any funding, whether they are deemed to be a startup or a scaleup. This may be because the founders or their families have invested in the business, meaning they have enough money without looking for additional investment.
