What is the difference between a startup and a SME?

What happens around us is the entrepreneur and the investor, and the reality is that the entrepreneur is not seen like very important and the investor looks like someone too sophisticated where we cannot make connection. That is completely wrong, a Startup when it is born and an entrepreneur what it does is that it is starting to generate value and if its Startup really is valuable the investor is going to want a little of that value, if we begin to translate that in other words, the entrepreneur is also an investor because he invested his time and effort in generating value, and now he is going to go out and he will be an investor who sells and on the other side there will be an investor who buys, one delivers a piece of the company and the other delivery money. We must begin to generate value as an entrepreneur and as investors we must understand that entrepreneurs are also valuable.

So, what is a Startup?

By definition, a Startup is a project that encounters a ‘problem’ and solves it through ‘innovation’.

From the ‘Problem’ part, it is important to understand that entrepreneurs do not create needs, hardly anyone creates them, but what they really do is to find problems out there and to propose a solution to those problems, if it is true that the problem exists and if the solution we propose is appropriate then we will have a Startup.

The ‘Innovation’ side is defined as when you connect two points that were previously not connected, the best example of that is the suitcase of little things, the wheels already existed for a long time as well as the suitcases, only that someone came up with add the keys to the suitcase and connected the points that were not connected and change the luggage industry forever. That is what we mean by ‘Innovation’; so, find a problem, solve it in an innovative way and then you will have a Startup.

But what is the difference with an SME?

On the one hand, an SME is a newly created company and a Startup also, usually an SME is a project that does not have an innovation with a traditional product, with a traditional business model that has a geographical advantage, for example, there is no a stationery in the corner of my house and I put stationery, that’s going to be an SME. On the other hand, Startup is much more complex.

A Startup was once:

  • Google
  • Uber
  • Apple
  • Netflix
  • And many more that you may know or use every day

Both SMEs and Startups are business ideas, both of you need entrepreneurship, both of you need financial education, marketing, legal, etcetera and in both of you need capital to start your business, so what’s the difference?

The first difference is called INNOVATION, and innovation does not have to think that it is only technology, because there can be innovation in three points:

  1. Product
  2. Business model
  3. Technology

Google and Apple know clearly that they are innovating in technology, but we will now think of someone who has innovated in PRODUCT, for example ‘Angry Birds’ that are a multi-millionaire dollar company and are very large, do not have much in technology innovation since in the end it is only a game but they changed the way we now play compared to Nokia’s 21st century Snake, so you do not have to innovate in technology to create an incredible product.

Finally, we have the business model, for example when it was the last time you rented a Blockbuster movie, I imagine that a long time ago and this is because Netflix came to change everything with its innovation that was to put all his movies on the internet. If you realize Netflix has no technology and does not even have one product, you are using the movies of others to do your business.

In conclusion, you can have innovation in Product, Business Model and Technology, that will make the difference with the SME.

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