What is the Difference Between a Start-Up and a New Business

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The word startup is appearing more and more frequently when discussing businesses.  So, what exactly is the difference between a startup and a new business?  A startup is a company in the early stages of development.  Their focus is usually on a new or emerging market demand.  People with a vision of a quickly developing market need found startups.  They fulfill a niche that no other companies are fulfilling.  Startups must have a greater tolerance for risk.

The foundational difference between a startup and other new businesses is that startups are usually focused on making revenue quickly.  Other new businesses tend to focus on long-term growth potential in established markets. A new company is more focused on long-term sustainable profits.

Startups strive to make an impact on the current market. New businesses, both large and small, may take many years of growth before they have any impact on their sector of the market.  Startups do intend to grow, and they intend to do so quickly.  Visionaries and entrepreneurs with the next ‘big idea’ lead startups.

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New companies often strive to fulfill a need within an already established market. New non-startup companies are not reinventing the wheel.  A new business bases its business plan on how similar businesses in similar markets have performed. Startups, in contrast, are operating in uncharted waters.

You hear the term startup most frequently in the tech sector.  The tech sector breeds more startups because technology is expanding at such a rapid pace.  Most new businesses in technology are exploring things that have no pre-established market.

There are major differences in the way startups are funded.  Initial funding usually comes from the founders’ own pockets along with money from friends and family.  Once the model proves to have the potential for growth, the founder may be able to find angel investors and venture capitalists.

Investors are taking a more significant risk in the hope of big returns on a startup.  Investors in other new businesses are taking a more modest risk, and their projected returns reflect that.  A successful startup will one day cease to be a startup and become an established business, usually through an initial public offering (IPO).

An established market and traditional funding are the hallmarks of a new business.  Non-traditional funding and a new market are what define a business venture as a startup.

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