Have you ever wondered why some new companies, such as Uber or TikTok, become popular so quickly, but businesses like local bakeries or small online stores remain limited to serving the local area?
There are two directions in business: startup and traditional entrepreneurship. Startups are the “stars” of the business world, striving for rapid growth and industry transformation with their ideas. For example, Spotify or Airbnb were initially small companies, but they aimed to change how people around the world listen to music or travel. Traditional businesses operate differently. An entrepreneur working as a local cafe owner or graphic designer focuses on continuous growth, customer service, and stable income generation. Their goal is not to conquer the whole world, but to conduct sustainable business in their field.
A startup is a new company created to solve a problem in a unique way. Small businesses usually develop gradually and serve the local market. Startups are designed for rapid growth and reach a wide audience. Therefore, startups require a large amount of money for growth, and usually investors invest in them and help them grow faster.
But what are the main things that distinguish startups from others? Why are they the focus of attention of the media and investors? Is starting a startup the right choice or is it better to run a traditional business? In this article, we will explain the differences in clear and simple language. If you dream of starting a big business in the future or simply want to understand how a business works, this article is for you. Let’s begin!
What is unique about startups?
A startup is not just a small business – it is built differently from the very beginning. The biggest thing that distinguishes startups is innovation. They don’t just sell what exists in the market; they try to create new products or transform an entire industry. For example, Tesla. It didn’t just produce cars, but made electric cars competitive with modern and gasoline-powered cars. Startups find problems and strive to solve them in their own way.
Another important difference is speed. While traditional businesses develop gradually, startups aim to grow as quickly as possible. Instagram was originally a simple photo sharing app, but within two years it gained millions of users, and Facebook bought it for $1 billion! Startups strive to quickly reach a large audience, using technology and effective marketing strategies.
However, a startup is not only a big idea and rapid growth, but also a big risk. For example, a bakery or clothing store is usually based on a proven business model, so the risk level is lower. However, the outcome of startups is not predetermined. Many startups fail, but successful ones can transform the entire industry.
Startups require a lot of capital for rapid growth – personal savings or small loans are not enough. Therefore, they turn to venture capitalists or angel investors. Investors invest millions of dollars in a startup and receive a share of the company in return. Investors take a big risk because they believe that this startup will be as successful as Uber or Airbnb.
Startups are created not just to make money – they are created to make people’s lives easier, faster, and better. Airbnb, for example, made it possible to live in unique houses instead of hotels. Spotify music listening method
changed. Startups find market gaps and create solutions that change people’s way of living, working, or relaxing.
These five features distinguish startups from other businesses. They are exciting, risky, and have enormous potential. But they are not for everyone! Some prefer the difficulties of building a fast-growing company, while others prefer running a stable and traditional business. Regardless of which path you choose, it is very important to understand these differences.
Startups and small businesses
Both a local bakery and a technology startup can start as a small business, but their goals are completely different. Small businesses aim for sustainable growth and serving a specific market segment, such as a city or neighborhood. They are usually financed through personal savings, bank loans, or small investors.
Startups, on the other hand, are designed for rapid growth and reach a large audience. For example, Uber aims to operate worldwide, not just in a single city. Therefore, startups initially require very large investments and rely on the support of venture capitalists or large investors.
Startups and corporate entrepreneurship
Large companies also strive for innovation, but they do it differently than startups. Corporate entrepreneurship is understood as the creation of new projects or products within an existing company. For example, Google develops innovative projects within its structure, such as Google Maps or self-propelled cars.
Startups, on the other hand, are created as entirely new companies and have the opportunity to conduct experiments independently of the constraints of large corporations. Corporations have resources and stability, but startups move faster, take bigger risks, and sometimes transform the entire industry.
Startups and social enterprises
Both startups and social enterprises strive to solve problems, but their priorities differ. Social enterprises mainly focus on solving social or environmental problems and often redirect their income to the development of their mission. For example, a social business that supplies clean drinking water or a sustainable fashion brand.
Startups, on the other hand, focus on profit and rapid growth. They sometimes help solve big problems (for example, Tesla promotes clean energy), but their main goal is to attract investment and grow globally. Some startups include social responsibility in their goals, but their main focus remains financial success.
Why are startups heavily invested?
If there’s only one thing investors love, it’s getting high returns. That’s why startups are so attractive to them. Traditional businesses grow slowly over the years, while startups aim to “explode” within a few years. Imagine: you have $10,000. If you deposit it in a small bakery, you will receive double the income in 10 years. Now, if you invest that money in a technology startup, this startup will reach a 100-fold value in 5 years. This is precisely why investors invest heavily in startups.
Investors are not interested in small-profit businesses – they want to find “Unicorn” (a startup valued at $1 billion or more). A local coffee shop can be profitable, but its growth is limited: it serves only one city or district. However, Airbnb can operate worldwide, which means it creates a huge investment opportunity.
Another reason startups attract funding is their ability to change the market. They will not simply enter the industry, but will completely transform it. Take Netflix, for example: it initially started as a DVD rental service, but with the transition to streaming, it radically changed people’s habits of watching television. Investors highly value companies that can create new markets or replace outdated business models.
And most importantly – exit strategy. Investors don’t invest just out of curiosity. They want to leave with a large profit. Startups provide investors with the opportunity to earn money in several ways:
● Acquisition – A large company acquires a startup for millions (or billions) of dollars. For example, Facebook bought Instagram.
● IPO – A startup enters the stock market, and investors sell their shares and make a huge profit. For example, as Uber or Airbnb went for an IPO.
From Idea to IPO
Startups don’t receive millions in investments in a single day. They go through several stages, each of which has a different level of risk and reward. The process works as follows:
- Pre-Seed Stage: Dreams in the Garage
At this stage, there is only an idea. The founders create the first prototype, receiving money from their personal savings, family, or friends. At this stage, there are practically no investors, as the risk is very high. Founders may be forced to work in a garage and live on fast food.
- Seed Funding: Angel investors enter as players
If the idea is promising, the angel investor (successful entrepreneur or wealthy person) will invest in it. They invest between $50,000 and $500,000 and receive a stake in the company. Google and Amazon also started with seed funding.
- Series A: Senior players enter the field
At this stage, the startup has already created a product, has users, and is making a profit. Now is the time to scale and attract serious investments. Venture capital firms operate here and can invest from $2 million to $15 million. At this stage, the startup must have a reliable business model.
- Series B and Beyond: Market Attack
At this stage, the startup has proven itself, and investors can invest from $20 million to $100 million. This money will be spent on hiring talented employees, entering international markets, and rapidly expanding the company.
- IPO: Time to earn big profits
The biggest dream for every investor is for a startup to enter the stock market and conduct an IPO. The IPO ensures that investors sell shares and receive huge profits. For example, Facebook’s early investors made millions, even billions, of dollars when the company went public.
For investors, startups are associated with high risk, but it is this risk that can bring them record profits. Therefore, startups remain one of the most interesting and attractive investment opportunities for business.
Conclusion
The main conclusion for future startup founders is that a good idea alone is not enough to start a successful startup. This requires courage, strong performance, and the ability to secure financing under conditions of uncertainty. Understanding market needs and building a truly scalable business distinguishes the winners.
The lesson for investors is that not all startups succeed, but successful ones can reshape the entire industry. Smart investors don’t just chase trends: they look for startups with strong teams, innovative ideas, and scalable business models.
In short, starting a startup or investing in it is one of the greatest opportunities for those who are ready to take risks, think broadly, and adapt quickly.
Prepared by Navruzakhon Burieva
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