The disruptive nature of startups is widely discussed and acknowledged. There are certain characteristics that make a small team of startup disrupt markets and even build one.
Every startup obviously wants to grow quickly. They raise a huge amount of funding, they hire growth hackers, marketers and spends huge amount of money pumping up sales and marketing. When all of this happens, a few fundamental startup characteristics take a back seat.
If a startup want to have sustainable growth, it shouldn’t rely on huge marketing spends and high customer acquisition cost, but has to focus on remaining “startup”, all the while they grow.
Build product that speaks for itself
Take any category leading startups with huge market share, there will be two attributes common in those startups – a consistent growth for a couple of years and an “awesome” product. When you have that “awesome” product, marketing and growth becomes easier. When the user experience of your product delights customers, they will, of course, spread the word about it. It could be slow but it will bring sustainable growth.
When was the last time you were so delighted by using an app or service, that you happily talked about it with a friend or colleague? A week or month back? These would be apps or services that are the category leader. As the startup grows, things like product scalability, customer support, backend and operational integration become a priority for the product team. Focus on making the product “super awesome” is reduced. The founder, who had certain vision for the product, remains less involved. There is a complex hierarchy of CTO, product managers and developer team. So, core values and vision for the product gets diluted.
There should be a clear definition of the vision and proposition which should be effectively communicated from time to time to key product managers and tech people. Processes should be set for feedback collection, study and evaluation of competition analysis, UX analysis, etc. Most importantly the tech founder—who envisioned the product—should still remain closely involved in product design decisions.
Listen to your customers
From the time of ideation to MVP and even further, founders collect a lot of feedback from the team, mentors, industry experts, prospect customers, users, etc. This remains at the core of strategic decision about the product. When startup focuses on growth, the founders gets busy with a lot of things, and feedback collection and learning from users becomes a low priority. The startup has a product, people are buying it, it has money to spend on customer acquisition, so they go on and keep doing that.
How many times have you felt so frustrated while using your favourite app or service, and felt like why those guys wouldn’t make that silly fix for it? Often, right? We discuss often that big companies don’t fix things quickly and their product don’t move quickly. That’s precisely what could be happening with your product. If it is not done, many strategic product decisions (and even other) could be affected, which in turn, could affect your growth over long term.
As startups grow, they need to transform feedback collection effort. Startups need to be using tools and processes to effectively gather and classify various types of feedback from various sources – from average users to influencers to industry expert to peers. While listening to customers is the most important thing for your product decisions, there are many areas for which you need to collect feedback from difference sources.
For startups, an early stage is all about survival and sustenance. Hence, the founders always try to reduce the cost for everything from product development to operation to marketing. As soon as the startup raise bigger funding rounds, it appear as if they have been rewarded for all their struggles. Obscene amount of money is spent in marketing, plush offices, avoidable operational costs, unrealistic pay scales, avoidable hiring, etc. All in the name of seeking growth.
There would be hundreds of startups which failed because they couldn’t maintain their unit economics of customer acquisition costs and customer lifetime value, and not because their idea was wrong or market wasn’t there. Even if we disregard failed startup, the expenditure could play big role in how financials pan out in the longer run. There’s that popular image of startups who raise huge funding and spend lavishly, and hence founders tend to believe that huge spending now doesn’t matter because you are creating value for tomorrow and that’s how it works. But it certainly doesn’t have to be that way. It might be true for few startups (yes, unicorns as they call it). But for most, it is obviously not true. You might not be creating that huge value for future by spending that high today. Founders realise when they have difficulty in raising next round or the startup faces sustenance crisis.
Metrics and budget should be defined to track and limit the expenditure. Every major expenditure decision from hiring a senior executive to infrastructure cost should be evaluated rigorously for most optimum RoI. Founders need to remain conservative about finance and expenditure.
Startups in the early stage are agile and lean in terms of changing anything from product to business model to team and lot more. They are always on the lookout for trends in their target market and technology domain. As startups grow big, they abstract away from all of these.
Think of a leading local listing growing startup who could be challenged by a new startup who embarked social features and network effect of same when social media and social web had begun to become a trend. There could be a paradigm shift in industry or a social trend in targeted userbase that could suddenly make a huge impact to the growth prospects of a startup. Founders need to keep themselves well informed about developing trends in their industry as well as technology domain they are in. There should be organised competitor analysis from time to time and have opinions and feedback of team on same. Most of the time founders remain adamant to stick to their vision of product, and with due arrogance that is expected out of tech founder to turns a blind eye to developing trend only to realise later that they missed the bus.
Sustain spirit of startup in team
In the early stage of startups, founders prefers to hire people who are fit for startups, which includes those who are fascinated by startups, are entrepreneurial and are well informed about the startup world, current trends, etc. This is obvious for various reasons. But when they grow quickly, they have to hire a lot of people in a short span of time and some of the checks are compromised.
When people are added to the team who doesn’t fit the culture, it can prove costly in multiple ways. For startups, the thought process of every team member affects the product or service of startup. When it is not in sync with the company’s vision or philosophy for product, innovation and excellence gets affected.
Startups should employ means of communication through which they can keep the spirit of “startupmanship” alive. In a startup’s larger team, there would be people who don’t relate to the world of startup at all. Startups can make “startup training” part of induction and onboarding of people, where they can learn what are startups, how they are different, what is this startup and the vision, philosophy, values of this startup are communicated clearly. Open houses could be used to keep the spirit of startup floating. It is about ensuring that the whole team shares the same spirit and the vision.
Of course, in order to grow, startups need to really be “grown-up” in some areas as well and not to remain “startup” (like managing formalities, compliance, information organisation, administration, etc.). And, of course, doing all of the aforementioned things isn’t the perfect recipe for growth. But these are the key ingredients of sustainable growth.