Last, but by no means least in our series on business tropes comes ‘the startup’. Investors can have opinions very different to what you would expect about startups.
Investors may well recognize and appreciate the energy and passion you have for your business, but startup management teams are often seen as idealistic, and naïve. Startups have huge optimism about what is possible but can lack realism about the challenges they are likely to face; occasionally their expectations can be irrational.
Startups can appear confused, as they sometimes communicate almost any vision investors would like about the company’s future. Sometimes driven by social objectives, startup founders can talk more about these and forget that investors are primarily driven by financial returns.
Chasing unicorns!
Startups are nearly always founder-led. They provide all the drive and zeal needed to overcome the most obvious hurdles in the company’s early days. This trope normally raises capital from friends, family and angel investors early on. Some investors sign up to the founder/s’ vision, while others view their involvement in the startup as an altruistic activity, believing they should support entrepreneurship. Meanwhile, some investors anticipate their involvement might help create the next ‘unicorn’ – a tech startup with a $1 billion-plus valuation.
Startups tend to cluster in ‘fashionable’ markets like consumer internet where conventional wisdom states there is money to be made, particularly where startup costs are low.
Market opportunity
For startups the market opportunity is unclear, as few others are doing what you are doing; so the rulebook on results hasn’t been written. Investment outcome is very variable and depends on investor ability to ‘pivot’ on to the right opportunity.
Pivoting
The most successful startups are generally those that retain flexibility about their business model and modify it until they find the right match. If an aspect of their business model works they keep it but if it doesn’t they ‘pivot’, or change it, to maximize the business opportunities discovered along the way.
Classic pivot examples include a switch in customer segment or need. A channel pivot is when you recognize your solution could be delivered by another sales or distribution channel much more effectively than your current arrangement.
Twitter began life as Odeo; a podcast subscription network. The firm became anxious when iTunes started to dominate the space and sought ideas from its employees. A remarkable shift saw Odeo pivot and became the micro-blogging platform we know today.
SalesSeek
One of the businesses I’m involved in, SalesSeek, is a SaaS startup in the sales and marketing field, which is dominated by big players like SalesForce and Microsoft. There would be no point in SalesSeek attempting to replicate or refine what these huge firms do, but we realized not all of this market had been addressed. By remaining nimble and turning our focus toward visualization, SalesSeek has found its niche – creating an integrated, well-designed platform for B2B that allows companies to do their sales and marketing in a straightforward, visually-appealing way.
Stay supple
There are many factors influencing whether a startup will succeed or not. If your business matches the startup model, having the flexibility to change your plans is fundamental as it allows you to take advantage of any expected or unforeseen opportunities that come your way.
At Vie Carratt, we can assist you in determining whether you are on the right track and how to raise capital with the right investor when the time is right for your company. Please get in touch if you’d like to find out more.
By David Carratt, Founder Vie Carratt.