Strategy – What it means for startups…!

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. 

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3 Responses to “Strategy – What it means for startups…!”

  1. JPM Says:

    Hi Kris,

    Interesting article… but

    [quote]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.[quote]

    You wont get anywhere doing this… there are not many unique businesses around today as you think! To rephrase you… there’s no BEST company either.

    YouTube competed against Google Video, who got bought out?

  2. Krish Says:

    JPM,

    Title of the post is ” Strategies for startups” – not expansion stage cos.

    Read bulleted point no.5 – “Never compete with others on the same things. It leads to escalation, leading to lower prices or higher costs unless the competitor is inept. ”

    That’s what it means while I said don’t compete head-on. When you compete head-on, both bleed. In the end one may win or both may lose leaving a third to win – startups can hardly afford either.

    Interesting that you took Gootube acquisition. In the first place YouTube was head and shoulders above Google video right from the beginning. It just went ahead and built a great product which the market loved. That’s precisely my point too…now read point no.5 once over.

  3. startups in india, startups in chennnai, startups in mumbai, startups in hyderabad, startups in bangalore, startups, startups meet, startups events, startups stories Says:

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