Late nights, cold coffees, re-heated meals are some things that all startup founders must be familiar with. But since these come with a promise of great future, entrepreneurs endure them to the best of their abilities.
Just take a look at a routine week of a startup founder:
“During the week, I’ll work 6:30 am-5 pm and 6-10 pm (travel time in between). On the weekends, I’ll check my email here and there, and work during my daughter’s three-hour naps.” Len Gauger, founder and CEO of Message Blocks
That was just one of the daily routines of startup founders and I find my 9-5 routine exhausting! But with great business opportunity comes great responsibility. It takes only a moment to come up with a great idea, but the success of that idea lies in how you plan your objectives.
In 2008, Garrett Camp and Travis Kalanick futilely tried to hail a cab. The snowy day didn’t help their case and they started to wonder how trouble-free it would be if getting a cab were as easy as pressing a button. And presto! The idea for Uber was born.
They managed to succeed but how? Want to know that perfect strategy that can lead your startup to success? Of course, you do. But first, you need to understand the reasons that result in the death of a startup.
Startup: Birth and Death
On an average, each year 50 million new startups emerge, which amounts to 137,000 startups launched a day. Hefty numbers, right? The numbers are incredible but the question remains. How many of them manage to prosper into successful ventures?
Going through tech journals, almost every other day I come across a startup that gets everyone excited. There are predictions that it might be the new Amazon or Uber, just to learn soon that the venture has closed. The ratio for startup deaths and births is one on one.
This ‘creative destruction’ is a savvy way of saying ‘survival of the fittest’. And there’s no denying that getting outcompeted is one of the major causes of this destruction.
Why Startups Fail
This question has become a nuisance to all the founders of startups which have closed down. Every other day, an essay from a founder can be found on the internet which pens down all the things that went wrong with the venture.
It has become customary for founders to talk about their experiences and to give advice to the future entrepreneurs. These essays are commonly referred to as ‘Post-Mortem Essays’.
The service of these fallen soldiers has provided the data for the reasons of startup failures. And you’ll be a bit surprised to know that the first reason doesn’t have anything to do with capital. Interestingly, running out of cash comes on 2nd place and I’ve seen people frantically search for funding without a thought to the 1st reason.
What is it? The lack of need for the product in market.
Sounds surprising, right? Almost 40% founders invested in a product or service that no one needed. Since the numbers prove that this is the first reason, I wonder what were the founders thinking. Such unrealistic expectations set by founders paved their way to the closure of their ventures.
The Shark Tank
Since Competition is number 4 on the list of reasons for startup failure, founders must be concerned about the other sharks in the tank. Many founders don’t scare much about the competition and often get out competed.
I’ve also known some founders who were so focused on the competition they forgot to pay attention to the other things. They must keep in mind that value creation is the key element.
“Companies that solely focus on competition will die. Those that focus on value creation will thrive.” Edward de Bono
Both these scenarios are most likely to lead your venture to closure. So coming up with the perfect strategy is the key to stepping towards a successful venture.
Though it is not the first reason for startup failure, competition still plays an important part in guiding a startup to maturity. This strategy addresses that problem and will help you along the way.
In his post-mortem stating, Mark Hedland of Wesabe talked about the issue:
“Between the worse data aggregation method and the much higher amount of work Wesabe made you do, it was far easier to have a good experience on Mint, and that good experience came far more quickly. Everything I’ve mentioned — not being dependent on a single source provider, preserving users’ privacy, helping users actually make positive change in their financial lives — all of those things are great, rational reasons to pursue what we pursued. But none of them matter if the product is harder to use.”
Know Your Competitors Inside Out
Starbuck’s entry into China is one of the best case studies you can find on competitive auditing. Their entry strategy in the market was to ease in smoothly so as not to threaten the culture of drinking tea in China. And in due time, they were able to penetrate the market and beat the competition.
But it wasn’t as easy as it seems. Competitive auditing is an easy way to understand the market and what your competitor is offering. The main focus here is on the strategies that they use, only the ones that promise success of course.
Once you get an idea about their way of things, you can devise your own strategies that ring close to the target audience. The easiest way to get the relevant information is through social media.
Search engines will also prove to be a worthy tool here. Search for products that are similar to yours and get an idea about their marketing strategies. If you don’t want the hassle of screening all this data, there are tools available that will help you in finding relevant data.
But just knowing the competition is not enough. Since their competitors have been in the market for long, most startups might not be able to outspend their competitors. And if you work smartly you wouldn’t need to.
Stick to your Agenda
Extensive research in your competitors business might make you want to deviate from your initial objective, but that shouldn’t be your goal. Try to win over your competition by doing things creatively.
It’s important that you choose the right tools to connect with your customers. Give them a way to communicate their feelings about your brand and for that social media is the best tool. The more traffic you have on these sites, the more chances that your brand gets acknowledged. Getting fans for your Facebook page isn’t as hard as it seems. Here are ten steps by Alex Chris to get 10,000 or more fans!
Create a Worthy Team
Your team doesn’t have to be just your employees. These people are the best brand ambassadors you can get. If they have a clear understanding of the value of your brand, they’ll be able to effectively enforce those values.
“Number 1: Cash is king. Number 2: Communicate. Number 3: Buy or bury the competition.” Jack Welch
Considering the words of Jack Welch, your only option in face of competition is to either bury it or buy it. Since most startups might not be in the position of buying their competitors, it’s better to go for the 2nd option and try to outsmart them.
Follow the strategy and you’ll have the best chance of winning against your competitors. Even if you can’t outrun them, you’ll have the opportunity to work alongside.