Are you wondering if you are on the right path with your startup? Are you seeing a sudden uprise of competition?
These are the kind of challenges that an entrepreneur faces all the time. It gets even more challenging in an environment where everyone is advising to reduce burn.
I have been wondering if there is a way by which entrepreneurs can predict what to expect in future. Anticipation can help plan better. I do realise that it is impossible to make accurate predictions, but after meeting more than 250 entrepreneurs in the last nine months (as entrepreneur-turned-VC), I see a few patterns emerge.
Thinking through this framework would either force you to think deeper about your business and create a defensible strategy or allow yourself to fail fast at a low cost. It starts by asking a basic question -
What are you building?
I find startups building roughly one of three types of products – Business, Product or Hack. Let’s see how to identify which bucket you belong to and what to do about it.
If you are building a business, then at some point of time you need to be able to sustain as a standalone business with revenue and profits. Any successful business has to be able to withstand pressure of economic cycles. In today’s technology world, I see a few key characteristics of a good business.
It’s impossible to get favourable answers to all the above questions for your startup. But by asking these questions, you can probably tweak your strategy to solve for as many variables as possible.
If your startup doesn’t qualify as business then it might be in category of product or hack.
If you find that another large company has a right to win against you, then please think hard on how you could build defensibility. Please don’t assume that a larger company will find it hard to execute. There are many ways to build defensibility. If you can’t figure out defensibility then it is probably best to get acquired by the large company by making yourself as attractive as possible.
In case you are not able to figure out your own distribution and are too dependent on another company for distribution then also, it is probably best to get acquired.
If you are neither a business nor a product, you are probably a candidate for this bucket. In such cases, instead of trying to claim yourself as a business, showcase your skills to a larger company and get an attractive job.
So many things are ambiguous in the startup world that you may not be able to find the right answers all the time. But in my view asking these questions is better than ignoring them.
Read next, from the same author: ‘Don’t get lured by the sexiness or glamour associated with entrepreneurship’