The best startups generally come from somebody needing to scratch an itch. - Michael Arrington
A company can be defined as a startup based on a number of parameters, such as fewer employees, a flat structure, a chilled out culture and comparatively more flexibility. According to Merriam-Webster, a startup is defined as “the act or an instance of setting in operation or motion” or “a fledgling business enterprise”. Also, as per the American Heritage Dictionary, a startup is “a business or undertaking which has recently begun operation”. But, as time passes, every startup eventually turns into a well-functioning corporate giant. There are a lot of parameters that indicate this transition and also act as disclaimers to change the way daily chores are handled in the organisation.
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It is all about the caps
Alex Wilhelm of TechCrunch has proposed a 50-100-500 rule, according to which three parameters, namely 100 or more employees, a revenue run rate of $50 million and a valuation of more than $500 million are indicative of the fact that the company isn’t a startup anymore and is heading towards an important transition. Further, the companies are categorised as small cap ($300 million to $2 billion), mid cap ($2 billion to $10 billion) and large cap (more than $10 billion).
In a startup, there are times when the entrepreneur needs to multitask, from being the office boy to the ultimate decision making authority. When the organisation expands, however, it might be observed that there are teams with specific skill sets to handle specific tasks.
Growth rate and funding
Startups tend to have higher year-on-year growth rates as compared to corporates, as they have a greater scope for improvement. Further, an organisation can be considered to be in growth-mode and not a startup once it undergoes two rounds of equity funding at a substantial level.
Unlike in startups, the decisions in a corporate aren’t short term, but are taken on a long term basis. The ownership being offered up in turn for raising funds; changes to partnership decisions, making sure not only to pool in the money, but also the skills. The major firm decisions can’t just be made in order to avail of an opportunity, but are made strategically, considering the far-reaching impact of the same.
Structure and business model
For a startup, the organisation structure is relatively flat, as compared to the hierarchical structure of a corporate giant. What’s more, for established firms, the business and revenue model becomes a constant, while a startup can still manage to take bold decisions of changing business models.
Automation comes into the picture
When the organisation transitions from a small scale startup to a corporate giant, a lot of automation takes place. There is a shift in methodology from being people-oriented to being process-oriented, so as to save time and provide the deliverables.
When the organisation expands, there is a shift from relationship building with a few key accounts to brand building in general for the masses. More investment is made in activities pertaining to customer awareness, brand image and brand recall, rather than spending time in personal interactions with a few customers, as the customer base being served automatically widens.