Learn To Unlearn And Get Past The 5-Year Mark
Common challenges faced when early-stage start-ups adopt a capital-funded strategy is that it does not leave a lot of room for them to grow at a natural pace and shape up as envisioned
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How Does Your Start-up Stack Up?
Call it a gamble. Call it rocket science. There are many names that entrepreneurship goes by. Whilethe entrepreneurial ecosystem continues to be abuzz with words like AI, Fintech, and Big Data and even as wealthy investors continue to deliberate on whether bitcoins or start-ups are a better bet,let’s take a look at what can actually help start-ups make the cut.
Growth Funded by Customers
Many entrepreneurs make the beginner’s mistake of focusing on just capital inflow at an early stage, when the real sustainable capital comes from acquiring customers. Capital-funded growth and customer-funded growth strategies are both good fitsat different phases ina start-up’s lifecycle.A customer-funded growth path is a great place to start than capital-funded growth, if you’re thinking long-term.
Common challenges faced when early-stage start-ups adopt a capital-funded strategy is that it does not leave a lot of room for them to grow at a natural pace and shape up as envisioned, as you’re no longer playing by just your terms; the focus is on growing money quickly, even if it means taking risky bets, so your investors get their money back. On the other hand, a customer-funded growth roadmap is fuelled by networking, mentoring and revenue opportunities, which help in gradually but steadily moulding your product/services so it is market-unique and market-ready. It then becomes easier to get investors on-board at a later stage, as there’s nothingas reassuring to a VC as a promising business that offers a bang for its buck, and tell-tale customer numbers to support its case.This was the case with one of our member start-ups at EO Cares Cohort 2017-18, a start-up program run by Entrepreneurs’ Organization (a global peer-to-peer network of like-minded entrepreneurs) Bangalore chapter, geared at helping the next generation of business leaders through customer funded revenue track, sustained mentorship & support. The healthcare aggregator service provider was quick to garner our attention with its easy-to-use wellness platform. It wasn’t long before a revenue opportunity came by, as we picked them as the choice of healthcare service facilitator for our organisation. Down the line, they even went ahead to raise a capital of $3.1 million from international investors.
Customer-funded growth can also make way for a great exit.A brand that shows traction with promising customer numbers who find value in it, speaks for itself and sells itself. A customer funded growth path is naturally followed by impressive revenue figures, meaning – if all goes well – it’sonly a matter of time before your business catches its big break as it captures market share and draws attention, and the opportune moment comes by whenone of the big players sweep in and make an acquisition. A business’s credibility is marked by its ROI and customer base figures, and not the capital it has raised. The inflection point for a business is when the customer base begins to growand it shows potential to sustain the growth over a long period of time.
Find the Right Mentors
Many start-ups signup for paid accelerators, which no doubt fuel growth; however, what entrepreneurs also need is seasoned professionals or mentors from the same niche who have been there and done that.Through mentorship, entrepreneurs do not need to reinvent the wheel, rather they can learn from lessons that their mentors picked up during their journey, while not repeating the same mistakes. This also explains why start-ups that are mentored go on for longer than those without mentorship. Statistics show that a majority of businesses that are mentored make it past the 5-year mark. Many of our Cohort’s budding entrepreneurs consult seasoned membersof EO for getting mentored, deliberating on pivotal decisions, and business lessons that cannot be found elsewhere. Mentorship is crucial to stay in the game.
Then again, the right mentorship is just as crucial. A mentor who offers an umbrella tried and tested formula is never the answer to a start-up’s problems.Here again, entrepreneurs should not make the mistake of finding someone who hands them advice on a platter, but someone who understands their particular business problem, challenges their strategies and guides their business decisions while staying true to the vision.
Tap into Contact Capital
Whether you’re an early stage start-up looking at finding the right product-market fit, or a start-up that’s found a firm footing and is looking to scale up, nothing is as valuable as contact capital. Most start-ups invest their time and money on marketing via on-ground promotional events, OOH advertising, and social media, which is great, but what they’re not leveraging enough is the value of contacts, which when done right can transform to cash flow. All it takes is spending time connecting with other entrepreneurs – seasoned and new – in the start-up ecosystem. For instance, one of our Cohort start-ups, which offers corporate travel expense management platform to companies, has sparked interest in our community. We are considering adopting it in our R&R organisation to help reduce business travel costs. It’s about whom you know, and who can help you get your business where you want it to be.
Hustling and hobnobbing with C-suite members in the entrepreneurial ecosystem can open up new doors for your business, whether it is through generating new opportunities or building knowledge partnerships. Being in these networks is a great avenue to garner brand visibility, and finding fellow-businesses that synergise with your start-up.
Entrepreneurs like to scratch each other’s backs; you just need to find the right circle where you can learn, network, get mentored and grow.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.