Company vs startup: Myths and Facts

What is the difference between a company and a startup?

According to Eric Ries, author of The Lean Startup, startups are designed to deal with situations of extreme uncertainty. Start a new company, which is an exact clone of an existing business, copying business models, pricing, target customer and product, there may even be an attractive economic investment, but it is not a startup, because your success depends only on the execution – so that success can be modeled with great accuracy.

A startup is a human institution designed to create new products and services under conditions of extreme uncertainty, it is not a business, or better, is not yet a business, your focus should be on validated learning, seeking to answer two fundamental questions: the value hypothesis, it creates value for the customer? And the growth hypothesis, how customers discover my product or service? To do so it must use the feedback loop, Build -> Measure -> Learn to answer the main questions that will enable the business model, product or service through the information generated by the user’s experience acquired through the MVP ( Minimum Viable Product). Whenever the result is not positive (failure) must be pivoted, that is, modify the characteristics of the model, product or service, and start testing again.

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If successful, the startup starts thinking about become a company with a validated business model, service or product.

A startup is not just a new business, it may be within an already organized company, within a non-governmental organization or within a government organization. What do you mean? Let me give an example of SnapTax, a startup that wanted to rid taxpayers from the expensive  counters by automating information collection process. The process would take place by sending pictures of the forms taken by the users, a digital tool, this had not been done before, customers would accept the service? They would like it ? They would pay for it? How easy they would discover the service? The scenery was complete uncertainty, which characterizes the environment of a startup. However the Snaptax was created inside Intuit, the largest US manufacturer of finance tools, taxes and accounting, and yes, it was a startup.

A tip, whenever you have to think, “does that creates value for the customer?” Because it was not done yet, this is a startup.

MYTHS:

  • Startup is the nomenclature for a digital business.
  • Startup is a small business, or a company starting.
  • Companies, organizations and the government may not have startups.
  • The business plan is an outdated and should no longer be used as a good tool.
  • Having a startup and being an entrepreneur is not connected to administration.

FACTS:

  • There must be innovation, be it in the business model, the pricing, the product, etc …
  • Must face situations of extreme uncertainty. Does the market wants, or is prepared for my product or service?
  • The business plan is an important tool for the beginning of a company, not a startup. It is an important guide, which should be followed and changed conform the progress of the company.
  • The success of a startup can be built following the correct process.

Help me build the myths and facts of companies x startups, comment and contribute, ask your questions or give us your feedback.

A big hug,
Luis Henrique de Souza.

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