Scale-up and startup: know the main differences

Business

Currently in the technology market, names like startup and scale-up can confuse the professional’s mind about what are the main differences between business models. Especially in the proportion of companies, some points are very important for a startup to stop being called that, and become known as a scale-up. In addition, it is very important to be aware of the importance of implementing some methodologies, since now your company needs to have a higher financial return and in a shorter period of time.

Because of these doubts that may arise about what to do and also for some aspects between one and the other, we have produced an article that details what are the main differences of a startup for a scale-up. Check it out below.

Startup and scale-up definitions

Before we present the main points of difference between one and the other, it is necessary to summarize in a few words what a startup and scale-up is. Very briefly, a startup can be defined as a company that is still looking for consolidation in the market, developing its product or service, experimenting with customer segmentation and working to achieve profitability.

On the other hand, a scale-up is a company that has already consolidated itself with its product / service proposal on the market, obtaining profitability and proving to be economically sustainable. This difference between the two business models may seem silly, but it is super important for management to be done differently for both. Because of this, in the sequence, you will check the main differences between the two models.

The main differences between startup and scale-up


The choice of leaders

One of the main differences between the two business models is the leadership profile. The leadership required for a startup is totally different from that required for an advanced company, such as scale-ups. Explaining in a simpler and more didactic way, the more people you hire, the more people you need to manage. While it is possible for some managers to command a team of 10 people, supervising a team of 50 on a scale-up can be quite complicated.

This is because from the moment that the sectors become larger in number, there is more room for errors to happen mainly due to communication failure. Failing to solve problems – or solving them ineffectively – can increase your professionals’ turnover rate and decrease overall productivity.

For this reason, scale-ups usually have leaders with experience in corporate management. The more professionals of this mold your company has supervising metrics and processes, the more effective the founders can be to scale the company to even higher levels.

The risks

Another very relevant difference is related to the possibility of taking risks. One of the main characteristics of a startup is the low risk of trying new ideas, testing products, since its image is not yet consolidated and the risk is minimal. In this way, new ideals that have never been tested can lead to a great success, finding a “perfect formula” for your product / service.

However, when it becomes a scale-up, the results are monitored by investors, customers and a large number of members, reducing the possibility of experimenting during the process. After all, after achieving the success of having several customers, partners and collaborators, a company cannot afford to make mistakes that can dirty its image.

Adequacy of the product to the market

As presented in the topic above, a very clear difference between technology startups and scale-ups is the adjustment of the product to the market. While scale-ups have already validated their ideas by proving that their projects are economically sustainable, and are already perfecting their product in a consolidated market, startups are still experiencing things like customer segmentation, customer acquisition costs and product resources.

In other words, startups still don’t know what their potential return on investment is and are looking to find out what really works. According to studies, the process of finding that sweet spot takes about a year for most technology startups. Scale-ups, on the other hand, already have a sense of the amount they need to invest to achieve the planned financial return, increasing efficiency and security over values.

Team member roles

It is super common in this business environment that, during the initial stages of the company’s growth, team members take on various roles in order to meet different demands for agile growth. A great example of this is that most startups hire professionals with specific skills for a particular role, but also expect these people to be proactive about other challenges.

With the growth of this business model and the leverage for a scale-up, it is important that this changes and that some activities of the teams are restricted. An example of this is the transformation of the sales and marketing team into two separate departments and even hiring specialists in these areas. This is because a scale-up needs its professionals to be 100% focused on the activities they perform with more quality and performance, increasing daily productivity.

The use of systems and solutions in your scale-up

Because these are more initial projects, startups may suffer a little from the lack of specialized systems for the development of their solutions, whether to carry out marketing campaigns, develop applications and even answer emails. In this case, innumerable processes can be tried in search of the most assertive model.

From the moment it becomes a scale-up, this cannot happen since there is no scope for testing in the daily life of a company of this size. Thus, solutions need to be properly implemented and running in an agile and smooth way, essential to maintain quality control and complete projects on time.