Too much has been written about how to build a startup from conceptualization to monetization. I’ve never heard entrepreneurs grumbling about lack of material on usable startup strategies. Perhaps “strategy” is considered not so `relevant’ by early stage entrepreneurs. They are kinda’ certain that it is not an immediate priority and something to be addressed later in the day. Or they just oversimplify it by saying “ let’s build some features into our product to counter `existing’ competition – that should stand us apart ”.
Well, it’s not that simple. At least the VCs with whom I’ve interacted don’t think that way. This is one of the foremost reasons behind their refrain , “ we don’t get many investible business plans from [ startups in ] India”. This is also the reason why many seed stage VCs from the Valley after a few weeks of coming to India, transform themselves into late stage investors as these are clearly de-risked, mature businesses. That way they don’t let their funds idle away at least.
But remember, nothing is more lucrative or appealing to a VC than a well founded seed stage startup which carries a lot of promise. Investments at early stages have the potential to deliver explosive returns to VCs as they get them a bigger slice of business at a lower valuation. So it’s an entrepreneur’s imperative to square his plan fundamentally, technically and also strategically so that he gets `momentum’ money from VC at the right time.
Dos and Don’ts.
- By Strategy, you mean what will make you unique. Period.
- Define the right industry and right business. Bad strategy often flows from bad definition of business and its end-customers. For eg. If you have a global target audience but develop a product on the basis of local preferences, you got it wrong.
- Don’t try to compete `head-on’ with other companies. No one wins that kind of struggle. Develop something around your unique USP in the targeted niche.
- There’s no one `best’ company or one `best’ process. Theoretically, it limits your initiatives since you ease up when you think you’re better than the `Best’. Best – is always subjective and a matter of perception. You have to strive to continuously improve no matter what you think of yourself and others.
- Never compete with others on the same things. It leads to escalation, leading to lower prices or higher costs unless the competitor is inept.
- Strategic goal is only one. To deliver superior return on invested capital. It means don’t waste too much time on development, achieve a faster go-to-market, grab the earliest revenues to breakeven fast. You can add to features later on. Earn-while-you-learn.
- Don’t bother too much on valuations early on. Focus on superior operating performance. When you deliver consistent growth, it would reflect in robust financial results and shore up the bottomline. Better bottomlines mean higher stock price which would automatically fetch you optimal valuation.
- Keep tweaking your strategy with ground realities if it has to stay meaningfully on course. Continuity is critical to strategy.
- Let your strategy be known to all your stakeholders – so that they can align everything that they do with that strategy everyday.
- It’s good for a competitor to know what your strategy is. Chances are better that he will find something else to be unique at, instead of creating zero sum competition.