Startup or Small Business – The Other Chasm

Original post by Peter Skalla via CFOWISE

There’s a world of difference between a scalable technology startup and a small business.  Decide which you are.

Crossing the Chasm is a startup classic written in 1991 about the challenge of going mainstream with a technology product.  I see an earlier mindset-based chasm with startups.  It’s summed in this question:  Are you a startup or a small business?

The terms are sometimes used interchangeably, but the confusion on this point tends to be cataclysmic.  There’s alignment that comes from meaning the same thing when founders, investors, and employees talk about these organizations in the same way.  Using a bit of the mindset and vernacular of Silicon Valley, let’s explore the difference and the implications of the chasm between startups and small businesses.

Steve Blank showed the world that startups are not just small versions of large companies.  Applying big company management within startups leads to frustration and failure.  A similarly critical distinction separates startups from small businesses.  Silicon Valley thinks of startups as organizations that are designed to become very big (my rule of thumb is $20 mil. in 5 years and $100 mil. in 10) and are characterized by extreme uncertainty because they seek to do something very new.  In contrast, small businesses are designed to meet the income, lifestyle, and other needs of their founders and are characterized by execution risk within known business models (dental practice, restaurant, building contractor, etc).

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