When I think 'startup,' I think of something that's going to raise some money, grow really fast, and just repeat that cycle forever. When I think of a company though, I think stable revenue streams. I have an idea for a company, an idea that's been validated by a lot of F500 companies, but I don't know if there's an alternative to VCs and angels for my financing as I'm not looking to raise a bunch of rounds and increase my valuation.
As your question infers, and as other people have suggested, a "startup" is not a "conventional" business - it is a *temporary* organisation established to search for a sustainable business model. This typically (although maybe not necessarily...) means high risk and high growth until it reaches sustainability. High risk means they cannot get conventional finance (from a bank), and have to find investment from venture capital and angel investors.
If yours is "conventional" business (aka a "lifestyle" business), where the business model, market, risks etc. are well known, you have the right team, and sustainability is easily attainable, then you should be able to put your business plan in front of a bank manager and get a loan.
Well Steve Blank, a well known thought leader in the startup community and the grandfather of the "Lean Startup" movement, describes it this way:
"A startup is not merely a smaller version of a large company. A startup is a temporary organization in search of a business model."
In other words, startups don't yet know what they want to be or what they will be when they "grow up". They are testing, learning, iterating and sometimes pivoting until they hit a viable, repeatable and scalable business model. Then at some point when they have a clear market and viable growth they eventually graduate out of being a startup.
Compare this to a "small business". A small business is typically a type of company that already exists and has a known market. Examples would be a plumbing business, Italian restaurant, architectural firm, etc.
Small businesses are known quantities. You can draw up a traditional 30 page business plan and then execute it. You can go to traditional lenders with that business plan and they will loan to you.
But startups are far riskier, with a lot more unknowns. That's why traditional banks don't typically lend to them. You can't draw up a realistic business plan beyond a pitch deck because things change so fast in a startup. You might find the market you assumed you were going after was wrong, or your line of business might radically change. You are learning as you go. So you tend to have to rely on funding sources that are OK with that amount of risk, like Angles, VCs, and loan sources that cater to startups.
I only know 100+ angels, but I've yet to meet one who isn't concerned about return on investment. Many aren't willing to accept the risks associated with 100-to-1 shots, but they're still looking for positive return, the more the better.
Hmm. You think that startups don't have an end game and must raise money (both of which are false) and that "companies" don't want to grow (also false)...
If you don't want to raise your valuation, why should anyone invest?
FWIW, most highly successful companies don't raise money, let alone from angels and VCs.
Pretty confident re: your valuation concerns! :-)
Well, ideas are nebulous and execution is everything. From my experience, one cannot finance ideas through traditional methods. Banks will lend on specific terms for a specific need, and although there are federal programs for small business loans, I would imagine such a limited-scope product would not fit your fortune 500 idea. Thus comes friends/family/funding sites or more likely pulling money out of your home in hopes to 'prime to the pump' on your idea in an effort to build a small team, create an MVP/or something substantive. And yes, perhaps approaching Angels, who would be more likely to take a long ride with a person/s who have a novel idea, not as concerned about a return on investment. *Update* This is relative to VC's - do not think angels are just giving away money - they just may be more lenient on terms/time than VC's.* I don't have much experience in this arena, so perhaps something will provide more specifics/experiences.
Regarding VC's, understand they are investing other people's money (I call it OPM - I guess I love acronyms). In my view, valuations increase when you can walk into a VC meeting holding a clear vision, viable product, and quick path to profitability. Know your numbers (product specifics/tech, marketing and sales plan with quantifiable result, sales process, customer cost of acquisition, CLV, onboarding, customer experience, etc.). If you cannot create this, find someone with a background similar to mine who believes in your vision to join you.
That's an interesting question and I think plenty of answers have tried to clarify the startup vs company question. Those thoughts aside, I would look to personal assets as a method to raise funding or traditional business loans or personal finance. The risk here will lie with you but so will the benefits. Depending on your location there might be state, government, or sector based lending that could support your project such as enterprise initiatives and business grants. Otherwise you could look to crowdfunding as a growing source of funding for a business. Hope that helps! Good luck, Steve