Unicorns, scale-ups and disruption: The story of start-ups

Start-ups get the headlines with cool ideas, innovative tech and big money. So, what can SMEs learn from this new way of doing business?

It seems like everyone knows someone with a start-up. What began as an elusive type of business, usually around something tech-focused that most people only pretended to understand, has transformed into a staple part of the global business landscape.

And as with anything that becomes established, the start-up scene is already starting to evolve and change. After all, a start-up is just a short-term phrase to describe the phase between starting a business and finding a way of operating that suits the people and the product.

While small businesses are intrinsically different from start-ups, there’s still a lot they can learn from this exciting way of doing business.

From agility and risk taking to hunting investment and embracing the latest technology, we’ll explore what makes start-ups work and how small businesses change the way they work.

What’s the difference between a small business and a start-up?

To put it simply: a start-ups use an unstable and risky business model, which is about disruption, experimentation and explosive success/failure.

A small business is classified as “independently owned and operated, organized for profit, and not dominant in its field,” by the U.S Small Business Administration.

Which isn’t to say that small businesses aren’t disruptive and experimental, or that start-ups aren’t seeking profit and market domination. It’s more that everyday goals have changed, usually when a start-up has proven itself as viable and begins the transition to being sustainable and long-term – aka acting like a small business.

There are a number of processes and ways of developing products that typify the start-up experience as well. Iterative design and being responsive to customer feedback lead to a flexible, hit the ground running approach to development.

Steve Blank, serial entrepreneur and speaker, evangelised these concepts, helping them become a staple in most new business models. When you’re spending more time testing and evaluating and reacting to new data and information about a product, then you’re able to refine the finished version faster. This way of thinking is the antithesis of traditional development, which front-loads the process with theory and doesn’t delve much in the way of field-testing.

What helps small businesses become established is that they do a select number of things very well and get known for it. This process usually takes years and doesn’t cause many ripples in what is often a saturated marketplace. It’s a sustainable practice but doesn’t prove the same explosive growth and disruptive thinking that start-ups are known for.

There’s more that one type of start-up

Start-ups are defined based on the revenue and time. For example, start-up that achieves success and revenue of more than £7,000,000 within five years are called scale-ups. And when scale-ups achieve more than £710,600,000, they’re classed as ‘unicorns’, which implies something incredible is happening. In a study of nearly 900,000 companies, just 103 reached this elusive point of differentiation.

Getting to this point requires innovative thinking, a solid business plan and crucially funding. Start-ups have the financial backing of investors in order to fuel their growth and chase opportunities. While the average small business doesn’t have access to millions of pounds of funding, looking at funding in the form of loans and grants could give you the kind of boost you need to start scaling up.

In 2011, The coalition government recognised the benefit of resource and support for start-ups and launched Start-Up Britain, which is funded by the private sector and combines investment with the all-important mentoring. And now the UK start-up space is one of the most exciting in the world. Not only are the top 500 growing by nearly a third every year, an incredible 40,000 have been given access to founders and investors to get them to the crucial scale-up stage.

Start-up survival

Scale and growth is the goal of most start-ups, but long-term survival in uncertain markets isn’t as easy as it sounds. Some experts say that one of the healthiest ways for start-ups to secure a future is to think beyond their home country. Relying on a local or national market will only take you so far. Looking beyond the UK for sources of funding and new customers massively expands your growth potential.

Key to remember is that certain financial limitations are going to be affecting every other start-up out there. It’s those who aren’t putting all of their eggs in one basket that have a better chance of weathering any financial storm. A simple expansion from the UK to mainland Europe could be a gamechanger.

Not only that, some products naturally lend themselves to global expansion. If you’re offering services, like many tech-based start-ups, it’s easier to expand. When a business lives in the cloud, it can instantaneously exist wherever you need it to. For physical products, making the most of new and emerging markets around the world could transform your business.

The key lesson to take from the global view of many start-ups is that they don’t see borders as barriers to growth, and in doing so become more resilient.

Start-up trends to consider in 2018

Start-ups make the most of opportunities in the real world. By being agile and responding to real problems in industries or the process of real life, they’re able to make a real difference – which can lead to financial success and notoriety. Here are a few trends which keep cropping up in most of the big players at the moment.

1. AI is transforming every industry it touches and there are increasing numbers of businesses being established to make the most of it. Those who can use AI to change the way they develop products and run their businesses can get an immediate step-up in efficiency, while those who work out how to bring AI to the masses are going to be in demand.

2. Disruption is still the biggest moneymaker in the start-up world, with industry leaders like Uber, Deliveroo and Airbnb showing how transformative start-ups can be in any industry. Taking a look at established, static processes and ways of living or working and finding a way for tech to shake it up and optimize the experience is a sure fire way to make long-lasting cultural impact.

3. The Internet of Things is connecting a lot of devices and the way in which we process that data and connect even more ‘things’ will be crucial for changing the way we live. Those who can find a way to connect the dots and provide tangible uses for technology have the potential to make huge gains.

How SMEs can learn from start-ups

While the frenetic pace that start-ups maintain isn’t for everyone, it’s undeniable that it can get incredible results. Taking a pragmatic view of the world of start-ups is probably the best way SME’s can pick and choose what’ll work best with their ambitions for growth. This is equally applicable to those who are starting a business and want start-up ideas, as well as those who have an existing business and want to make some changes.

For another look into the world of start-ups, check out our article on collaboration between small businesses and enterprises and small businesses and the public sector.