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Startups are not SMEs – here’s why the distinction matters

Are startups the same as SMEs?
Image credit: Master1305 / Shutterstock

A favourite phrase at the Startup Coalition is “there’s no such thing as an SME”. The term too often ends up as a catch-all for very different types of small and medium enterprises – from a single plumber to the mid-market firm where they get their supplies, or a family-owned corner shop to a Series A biotech trying to cure cancer.

SME is the policy-making equivalent of a condiment cupboard – some of them are French mustard, some are brown sauce and some of them are sriracha. In other words, an enterprise that is not a household name or a large corporate covers a vast amount of business models.

The startup world must resist being swept into this condiment cupboard. In the grand scheme of things, the UK has not had a startup ecosystem for long – less than 20 years – and it is incredible what it has managed to develop in that time: third in the world for VC investment, known globally for our exceptional talent and hosting world-leading industries such as fintech and AI....