You are reading on Startup Essence, thus you are familiar with the term “start-up”. Scale-up is another important term to get acquainted with, and we are going to see how scale-up differs from startup in this article. We adivse you to check and review your knowledge on various topics around Startups, What is a Startup?, 6 principles of Startup Team building, Why do startups need fundraising? and much more available on StartupEssence.com.
What is the difference between Startup and Scale-up?
The scale-up is different from a start-up. The latter move into a scale-up phase when their main challenge is no longer to search for a viable business model, but to grow in order to execute their business model on a larger scale to better reach their market. Scale-up is still unknown to many people. However, this word is more and more talked about. What is it referring to? This article aims to provide an overview of this concept, now essential in the entrepreneurial world.
In order to fully understand the notion of 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 a 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 put the scale-up context back:
“Scale-up” corresponds to a stage in the life of a company when it grows, when it “changes scale”. These are startups which have managed to overcome the obstacle of the preliminary phase and which 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 stage of a fully established company because it is still growing.
Scale-up and Growth Phase
Unlike the start-up which is in the early stages of determining 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 major difference between start-up and scale-up therefore lies in the growth phase.
“It’s important to differentiate between a start-up and a scale-up. Some people start working for a start-up and leave the box once they have become a scale-up, and on the contrary, 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 Helpilep sy and ex Head of Services and Community at Scale-Ups.eu
To qualify as a scale-up, a company must have at least 10 employees, with a growth rate of at least 20% over the last 3 years and a turnover of 1 to 3 million.
The environment difference
Working in a start-up or in a scale-up has some major differences. Depending on expectations and needs, one can love or on the contrary not like working for one or the other structure.
– The start-up environment : Autonomous and independent people will be like fish in water in this type of business. They will be able to flourish by developing their creativity. We can enjoy great freedom, but this can sometimes be done to the detriment of financial stability.
– The scale-up environment : The scale-up is the ideal place to participate in a project with a bright future. It also offers the advantage of offering supervision and more secure income than the start-up.
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
How to successfully make the start-up – scale-up transition?
To move from a start-up to a scale-up, it is crucial to establish a recruitment plan. But it is a process that takes time. Do not skimp on resources (including financial) to hire the right talent at the right time to grow the business .
If a start-up wishes to evolve, it must be endowed with the entrepreneurial mindset necessary to perpetuate the value of its products, while having the desire to improve them, to reinvent itself, to launch ambitious projects and to grow. question. If in addition the financial situation of a startup is stable and that it exceeds its most ambitious objectives, it may be time to consider a growth towards the scale-up! A good scale-up is ultimately a structure which has managed to keep its start-up spirit and which has been able to organize itself despite the load of ideas and projects.
If your start-up evolves into a scale-up, keep the good work culture established during the start-up phase. If there is already a good entrepreneurial spirit and effective processes in place, scaling up won’t be that painful. Andreas Creten – CEO and Founding Partner of madewithlove
A company with strong growth in terms of jobs, while their average growth in the number of jobs is over 20% per year; A company of a certain size that has at least 10 employees on fixed contracts; An ambitious company that aims to become a leading company in its market on a global scale can also be examples falling into enterprises in their scale-up.
To recap, It’s insightful to see Scaleup in the lens of Capgemini, on how they define startup Vs. scaleup: