Thursday, July 25, 2019

Start-up vs Scale-up: What is the Difference?

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You have probably already heard the term "start-up". Scale-ups, however, are still unknown to many, but the word is becoming increasingly used in 2019. So, what exactly does it mean? This article aims to provide an overview of the concept, which is now of crucial importance in the entrepreneurial world.


Definitions

In order to fully understand the concept of a scale-up, let's first recall what a start-up is:

"(...) it is neither age, size nor sector of activity that make a company a start-up, but the following three conditions: 1) the prospect of strong growth, 2) the use of new technology, and 3) the need for massive financing, through fundraising."
Patrick Fridenson, business historian


Now that we have established the context around start-ups, let's now consider scale-ups:

"Scale-up" corresponds to a stage in the life of a company when it grows, when it "changes scale". These are start-ups that have successfully overcome the obstacle of the preliminary phase and are candidates to become large global companies and real job creators. The scale-up has therefore left the start-up stage, but is not yet at the fully established company stage because it is still growing.


Unlike the start-up, which is in the early stages of determining the product-market fit, the scale-up has already validated its product on the market and has proven that its pace is stable and sustainable. The main difference between start-ups and scale-ups is therefore in the growth phase.

helpilepsy"It is important to distinguish between start-ups and scale-ups. Some people start working for a start-up and leave the company once it has become a scale-up, and on the other hand, there are some people who work in a scale-up and will never like working in a start-up.
Ludovic Ampe, Chief Customer Office at Helpilepsy and ex Head of Services and Community at Scale-Ups.eu

scaleup-3

To qualify as a scale-up, a company must have at least 10 employees, a growth rate of at least 20% over the past 3 years and a turnover of 1 to 3 million.

 

The different environments

Working in a start-up or scale-up has some major differences. Depending on expectations and needs, one may love or not feel good about working for one or the other structure.


In concrete terms

The start-up environment: Autonomous and independent people will be like fish in water in this type of company. They will be able to flourish by developing their creativity. There is a great deal of freedom, but this can sometimes be at the expense of financial stability.

→ See our article: What is the start-up mindset?

Scale-up environment: Scale-up is the ideal place to participate in a project with a bright future. It also offers the advantage of providing support and income that is more secure than the start-up.
→ See our article: 9 advantages of working in a scale-up

andreas-creten

The moment you raise money, things start getting more serious. You are confronted with a board of investors who want to be in control of your organization, see numbers and updates from the team. Especially when you go into series B, it quickly becomes serious in the very early stage. Also, you often see that the startup spirit starts to mature, and change. Andreas Creten - CEO and Founding Partner of madewithlove


Make a successful transition from start-up to scale-up

startuptoscaleupTo move from start-up to scale-up, it is crucial to establish a recruitment plan. However, this is a time-consuming process. Companies must inject the necessary amount of support, especially financial, to hire the right talent at the right time to grow the company (insert smart recruiting link).

In Belgium, many start-ups have been created in recent years but only 5% reach the scale-up stage. And why is this? Because the transition started too early.

If a start-up wants to evolve, it must have the entrepreneurial spirit necessary to perpetuate the value of its products and the desire to improve them, reinvent itself, launch new and ambitious projects and question itself. If the company is in a stable financial situation and exceeding its most ambitious objectives, it may be time to consider moving towards becoming a scale-up! Essentially, a good scale-up is a company that has retained its start-up spirit and that has successfully organised all of its ideas and projects.


Maja Fiołek

Written by Maja Fiołek

Maja is an Employer Branding Evangelist & Communication Ambassador and has shared her life between Poland, Finland, and Belgium. Outside of work, she is a triathlon enthusiast, a wannabe cake designer, and a proud mom of a 7-year-old.