We live in a world today where the word “startup” gets thrown around all too often. What exactly is a startup? When does a startup stop being a startup and become something else? Is Uber a startup? What about small businesses? There is a lot of lingo that gets thrown around in the entrepreneurial community, but my personal favorite explanation of defining a startup vs. small business was answered by one particular Quora user. Not only does this answer resonate, but explains why the distinction matters at all.. Give it a read and let us know how you differentiate between a startup and a small business in the comments below!
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Tom and Tara are neighbors in a hot tropical country. Both folks decided that they needed some shade in their backyard. Tom went ahead and bought a big umbrella. It was a bit expensive, but much less cumbersome.
Tara took her friend Tanya went to the nursery and bought a small plant. People thought she was crazy and she really was. She planted it in her backyard and watered it. Unfortunately, it is not easy to grow a plant in that condition and plants often died being unsuited to the place. Other times they grew in random direction.
She kept trying different types of plants, until one of them started growing fast. While the plant was growing it still was not offering any benefit. It was not providing a shade nor a fruit nor any other benefit. It just sucked a lot of water, manure and time.
After years, Tara’s plant grew to become a large tree. It provided shade not just for Tara, but for a large region. It provided fruits and other benefits.
The umbrella that Tom brought stayed the same. It didn’t grow. It didn’t provide any fruit.
A small business is a self-sustaining organization that is designed to generate revenues or even profits from Day 1. It might not require as much investment and is less risky. However, it also doesn’t have a lot of upside.
A startup is akin to a small plant. It doesn’t offer any immediate benefits after planting, but just keeps sucking resources. Most plants you try to grow die before they become a tree. However, if it does survive and grows big, it can provide benefits for a long time to come. It can scale by growing vertically and also generate seeds for new child plants.
Another way to think of a startup is a new formula a chemist grows in his lab. It requires a lot of experimentation and have a high chances of failure. A startup entrepreneur who fails in an idea is akin to a chemist who builds an experiment that doesn’t bring the result – it is part of the process.