By investors, startups were considered as small versions of big companies for years. This was problematic because there is an ideological (and organizational) discrepancy between the start-up, the small enterprise and the large corporation, each of which requires different financing strategies and key performance indicators.
Start-up is a temporary organization aimed at finding a repeatable and scalable business model. People who run that type of activity seek not only to prove their business model, but also to act quickly in a way that will have a significant impact on the market. This makes the first big difference between a start-up and a small business. The start-up founder not only wants to be his own boss - he wants to take over the Universe.
From the very beginning, the goal of is to develop a startup in a large company. The founder believes that he has come up with another phenomenal idea that will shake the industry, take customers from existing companies, and even create a new market. This is a clear contrast to the definition of a small company, which is usually described as owned and managed, organized for profit, and not for domination in its field. The final motivation of small business is fundamentally different from the one that characterizes startup.
The organizational function of the startup is to search for a repeatable and scalable business model. This means that the founder of the start-up must create a series of hypotheses regarding all elements of the business model. In order to quickly check if the model is correct, it is checked whether customers behave in accordance with the model's predictions. Considering this definition, the owner is of the opinion that after proving that the business model is not well planned - the organization's function has to change to get results and perform the mentioned model. In many cases, a loan is needed at the initial stage of its operation.
Although both startups and small businesses will probably start with financing from the founder, friends and family savings or bank loan - if the start-up is successful, it will receive an additional series of funds from investors and it will also be easier to obtain loans on better terms.