Differences Between a Startup and a Big Corporation and Why We Need Both

Growing up, you often hear a lot of household names such as Google, Boeing, Nordstrom, Walmart, or Costco without really knowing what they are. Big corporations from all over the world have been so registered into the society and people’s minds that we only know what they do and stopped thinking about their impacts to the society. In comparison, startups, though recognised by people, do not get remembered as easily and are not as integrated into our societies. However, it is important to note that both startups and big corporations are essential to the progressive improvements and growths of a society with the each of them providing different strengths, opportunities, and purposes.

By definition, a startup company is an entrepreneurial venture that is typically a newly emerged business that aims to provide an innovative product, process or service to the market and hopes to scale to a big company. On the other hand, a big corporation is a larger, more stable, and profit making enterprise that has certain social and economic impacts.

To better illustrate their differences, allow me to use the too commonly used but never disappointing analogy of comparing big corporations to the huge tankers and comparing startups to the small speed boats. The big tanker moves very slowly, is untouched by the ocean currents and waves, and hire a lot of people on board. The speed boat is agile, has a small team, and is capable of going far or be punished by the cruel nature of the sea.

Jumping off this analogy, let’s take a look at the strengths and weaknesses offered by startups and big corporations.

Startups:

• Huge risks with huge returns: According to Forbes and other sources like Wamda, 90% of all tech startups fail. Whether it’s the lack of funding, being pushed out by competitions, poor management, or not adapting to users in time and evolve to something better. There are many reasons that can lead to the failures of startups because of their immaturity as a whole. However, what comes with this high risk is a high return after success. Every startup company today dreams of being the next Uber or the next Snapchat because of their fast and rapid success.
• More than just a job: People often hear about the differences between working in a startup and working in a big company. So what is it like working in a startup? Easily put everyday is a battle. Startups are often working on tight schedules whether it’s to meet product deadlines or meeting a different investor. Working in a startup also means that you’re most likely going to have an active role in the growth of the company. People who join to work in a startup often believe that they are part of something bigger and it’s a valuable experience to watch a company they’re part of grow and mature.
• Small team: The reason why you feel impactful in a startup is often because you’re part of a very small team. The average startup team can very well be within 10 people. So when you’re part of that team, you are going to be tasked with tasks that are very core to the survival of the entire team. It’s great to be impactful in a startup, but that also means that it can go both ways. For example, Breezi, a website building tool, once hired a customer service manager that couldn’t keep up with the pace. Though the bullet was dodged at the end, it was still a close call for the team as a whole.
• Always pivoting: One thing you hear all the time about startups is that they are always pivoting, and that’s true. Pivoting correctly is crucial to the survival and growth of a startup. Instagram isn’t always the photo sharing application you see today. It started off as a check in application that allows you to show people where you are. Through a series of pivots and edits Instagram became what it is today. This is why it’s important to know that the final products of startups isn’t always what they set off to create at the very start. There will be new challenges and opportunities that will either evolve or destroy the startups.
• Offering innovation: Startups normally set of their journey as an entity that is trying to solve problems through innovation. Coursera and Udemy allows people to learn anytime and anywhere via their platforms. Venmo allows people to pay each other conveniently via their phones. Discord allows people to talk to each other as a team when gaming. Point is, startups always have their eyes set on a problem and they firmly believe that their products are the keys to solving these problems.
• Low cash flow: Another important but saddening fact about startups is their low cash flow. One thing you hear most about startups is that they are always fundraising. If you imagine a startup as a plane preparing to take off and its funds as the runway. The longer the runway is the more likely it is for a startup to take off successfully. That is why you often hear startups actively going through series of fundraising. Startups won’t take off without the funds necessary. It’s great to have a dream of solving problems, but there are also harsh realities that one must face when doing so.

Big Corporations

• Emphasis on profits over risks: Once a company increases in size, it starts becoming more risk adverse. Corporations know that for every success they get, there is more failures coming their way. When a corporation get larger in size, there are more things to consider such as the well being of its workers, its public images, and its constant growth. With so many people’s well being as risk, corporations can no longer take big leaps of faith. Instead, they have to focus on what they’ve been doing and continuing that success.
• Regular Jobs: Working in a big corporation means you’re the one out of thousand people they hired this year. You feel more invisible in a big corporation, meaning you hold less responsibility but less accountability as well. You will receive standard pay and have high security in hold your job, but in exchange for that is probably a less interesting life style.
• Huge Team: According to CNN money, the total number of employees among all Fortune 500 companies is 26,405,144 people. This makes the average number of employees per firm 52,810 people. Big corporations offer more job security to people because of how big they are. Big corporations aren not as likely to fail and go bankrupt compared to small startups because of their solid foundations, well established relationships with the government and people, and board of executives that makes decisions together.
• Doing similar things: Like previously stated, big corporations tend to be more risk adverse. They won’t make huge pivots and conduct large scale company restructuring like what some startups may do. They focus on doing what they do best and substantially increasing profit. Companies like Walmart are still innovating, but what keeps it alive is the everyday process of selling household goods to customers.
• Huge Pools of Funds: The biggest difference between startups and corporations is probably their amount of funds. Startups are always tight in cash flow and always looking for more. Corporations are always looking for profit, but a week without sales will not have as much of an impact to the company’s well being compared to a startup. Corporations also have more funds to spend on things like advertisements, talent hiring, and opening up additional locations. Startups probably have to pick between hiring a sufficient engineer and running online ads for 2 months. That is the main different. Startups have to be careful in every step they take while big corporations and more rebound for mistakes.

After reading these points, I don’t want you do treat corporations as boring entities and startups as time ticking bombs. The existence of both is extremely important. People needs to be hired by big corporations while innovation needs to be implemented by startups. However, this doesn’t mean big corporations are not innovative. Companies like Google, Apple, IBM, and Amazon are constantly looking at new technologies and creating revolutionary products.

Going back to the tanker vs speedboat analogy, you can treat big corporations as the tanker that moves slowly but never stopping. Startups on the other hand, will be the speedboats that explores different industries, the newest trends, and disrupting industries drastically. Uber disrupted the taxi industry without owning one car at all. AirBnB changed the hotel industry forever by not owning any real estate. WeWork changed the traditional concept of working space by through space sharing. Startups are constantly changing the traditional concept of things.

It is also a possibility that the two can work together. Startups are constantly being acquired by big corporations for their talents and unique value proposition. Facebook acquired Instagram, WhatsApp, and Oculus because it felt connected to what they were doing. Big corporations often treat startups as little R&D centres where innovation is created by constant failures and talented people.

Although startups and big corporations offer very different things, they both keep the society moving and ensures progress through their constant engagement in revolutionary changes and their look out for opportunities.

Jasper Chou is the Co-Founder of LYNKD, a new age product development and sourcing management firm that focuses on manufacturing and go-to market strategies.

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