The differences between startups and scaleups

Digitalization has transformed the business world like never before. With the technological advances in the virtual era, many businesses have set their sights on scalability and other things, causing the terms “startup” and “scaleup” to gain in popularity.  Here we tell you what startups and scaleups are all about.

Information and communication technology (ICT) has opened up a world of enormous possibility, making it easier and faster for people and companies to interact without geographic barriers. 

Such progress has stimulated entrepreneurship, with new companies — startups — emerging to offer goods and services based on new technology. Startups are known for their innovation in various sectors (e.g. in finance, they're known as fintechs). They haven’t been around as long as small and medium-sized enterprises (SMEs); however, they tend to have greater reach than local business, lower costs; and funding from third-party investors.

In particular, many startups strive to grow in size and revenue faster in hopes of becoming scaleups. While startups and scaleups are closely related, they have some major differences:

• Growth: according to the Organisation for Economic Co-operation and Development (OCDE), a scaleup grows above 20% in turnover or number of employees over a three-year period; a startup, however, has slower growth. 
  
  
• Lifecycle: a scaleup has a mature, established and profitable product or service; but a startup is still in the initial “birth” stage.
  
  
• Business model: a scaleup already has a profitable and scalable model because it has had experience to develop its product or service and understand its strengths and weaknesses. Therefore, its main goal is to grow in the market.
  
  
• Financing: a startup generally gets financing from “business angels”, third-party investors who provide capital to new businesses and help manage them. Scaleups have support from large companies, who are drawn to them by their maturity. 
  
  
• Human talent: Unlike startups, scalups have teams of people with specific (not general) expertise. They also have people who are well-known in their sector because they create jobs and wealth.