Would you rather start a startup or a SME?

Technology entrepreneurship has great potential for global economic development, especially as the lessons of Silicon Valley are spread beyond northern California.  This is not a trivial process, but many small steps can add up to great change.

One small step is for the World Bank and other development organizations to shift the language they use to describe startups.  Very simply, they should call them “startups” rather than SMEs.

A SME is a small or medium sized business defined by the World Bank and various countries simply by annual revenue and number of employees.  The exact yardstick varies, but the World Bank SME department defines a SME as having less than $15M in annual revenue and less than 300 employees. 

A startup is a very particular type of business.  It is a business with founders typically shooting to create immense value for shareholders, employees and customers.  VCs typically seek to back high-growth companies that could be worth 100s of millions or billions of dollars.  Those that are successful hire thousands of people, train employees, create massive wealth and inspire other startups to be founded. While individual startup success is difficult to achieve, countries that create fertile environments for startups will be significantly better off than their peers.

While SMEs are critical to every economy, the majority aren’t gunning to revolutionize their industries and create disruptive change.  The reason the distinction in language is important is that the problems faced by technilogy startups are different than those faced by most SMEs.  And by lumping startups in with SMEs, development organizations may fool themselves into thinking they are solving the entire problem when they are only working on part of it.

Technology startups need particular environments to improve their chances of success.  Some of their needs overlap with other SMEs while some do not. The World Bank, United Nations and other development organizations need programs specifically geared toward startups to maximize their impact.

Plus, acronyms are just plain less inspiring.  What would you rather be part of: a startup or a SME?

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One thought on “Would you rather start a startup or a SME?

  1. Pingback: Oneda | Aconteceu no Twitter 105 - 25/03/12 a 31/03/12

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