Crossing the finish line
I’m very interested in success, and a lot of what I do is about helping my clients to realize the success of their projects. The 6 Steps approach that I have developed over the years is designed so that it can be applied to every sort of business startup, no matter what the product or service on offer is. Sometimes people are surprised when I tell them that their startup is pretty much like any other in the challenges it faces. How can a tech company be the same as - for instance - a food company? My reply is that in raising money and gaining market attention, there’s almost no difference, and that in order to assure success, the step-by-step approach is the only game in town. And yet many startups around the globe decide that they are the exception to the rule. Their talents and uniqueness will win through, and obviously their offering will soon be racing towards the finish line. Big mistake.
So while I’m very interested in success, I’m also very interested in how failures occur, and I think it’s instructive to look at how and why some businesses fail to reach their potential. Let’s say we’re at the start of a long distance track race. Everyone taking part is more or less ready for the event, everyone has more or less the same equipment – running shoes and so on – yet clearly there will be some athletes who rapidly get ahead of the field, and others who trail behind. Some will show a great burst of speed at the start, then tire before the finish line. Some will pace themselves and come from the back to take a winner’s medal.
OK, so sport is not business, but there are similarities worth studying, and the advantage in business is that potentially everyone can cross the finish line and win. You may not be number one, but as long as you achieve what you set out to do, then you’re a winner. Probably.
Without doubt, incremental, measurable steps are the best way to achieve startup success. It might not be the ‘glamorous’ way of doing things, but bit by bit you’ll get to where you need to be. The alternative is failure, so what are the typical causes of startup failures? Here are a few pointers and observations:
Getting the team right
Very often new enterprises spring from a brilliant idea by a single founder. They have a vision, they’ve spotted a market opportunity. However unless they are extremely talented, or extremely crazy, they quickly recognize that they won’t be able to achieve their dream without the help of others. So they gather a team – maybe old highschool friends, or people met in the workplace. The team is almost certainly not perfect, but it’s the best available, and that’s OK. So the team gets going, and everyone is excited and energized. Except where are they heading? Is everyone following the same strategy? The chances are that in reality the team is very un-teamlike, with many different priorities and understandings of the project. For example, product development may not be talking to marketing, and everyone is presuming that IT is ‘just getting on with it!’
Then there’s what I call the Front Runner - the face and voice of the enterprise. In the early days the fact that the Founder doesn’t look their best, or isn’t articulate doesn’t seem to matter too much – there are plenty of other things to worry about. As time goes on however, and everyone on the team gets stuck in their own silos, the lack of an articulate, presentable front runner becomes ever more of a problem. Make no mistake, front runners are absolutely vital to a business, and in fact every enterprise should have a team selection of front runners, able to step in at any time and be able to tell investors, the media and potential customers exactly where the company is going, and how it will get there.
Another way of expressing this is as ‘marketing’, and many startups fail to appreciate how completely vital it is to have a marketing strategy from day one, which can be followed by everyone on the team, and articulated to anyone. OK, maybe the Founder will have a more global view of the marketing strategy, and be able to articulate it best, but everyone in the business must be up to speed.
If the team is up to speed and everyone shoulders responsibility for making the business successful, then there will be fewer conflicts, particularly between members of the core team. You might start as old highschool friends, but in the heat of getting traction, internal fights can demotivate everyone, and wreck the chances of success.
So a great team is essential, and all the principals of the team must be media-savvy, presentable and deeply immersed in the strategy. If you have any doubts about your team - any doubts at all - then you must address them sooner rather than later.
Getting the money in
It’s a big presumption, but let’s presume that the team is pretty much rock-solid, understands the strategy, and that each member is at the top of their respective game. The initial challenge of any startup is to get financial backing. It may begin in a garage – as Apple computers did originally – but soon there will be the need to pay salaries, hire experts, produce beta versions, go to market… None of this is possible without significant inward investment, and almost no startup ever has deep enough pockets to self-finance. And so begins the search for funding. It’s a process many startups are afraid about, and suspicious of. How much should they ask for? Too little and the project may not be realized, too much and potential investors could be scared off. And how much should be spent? Spend too little money on a project and the right advisors and experts aren’t brought onboard at the right time. Spend too much and there’s the risk of the project exhausting funds and running out of momentum before launch, or of failing to cross the finish line. I travel around a lot, meeting clients and speaking at conferences and meetups, and the number one question is always, ‘How do we get the money in, and what is the right amount?’
The how part is answered by the step-by-step logical approach. As I said, it’s not glamorous, but it works. The how much is also logical, and based on knowing your audience. This is the mantra I repeat again and again. If you know your audience then you can dialog with them, and if you are doing that, then you can be in a constant virtuous feedback loop about how much money is needed, for what purpose, and in what timescale. Believe it or not, investors are generally quite wise birds, and often know more about the market than the startup does. So don’t talk to your potential funders, talk with them, and you may be amazed by how helpful they can be in guiding you to the how, and the how much of the funding scenario.
This is achieved by Education. An article like this doesn’t allow the time or space to tell you all about the education process, but my book 6 Proven Steps to Attract Investors, now in its second edition, carefully lays out the roadmap for how ongoing education is a cornerstone of fundraising. Get education right, and the money will flow.
Getting the product right
I said that often a startup develops from a brilliant idea of the founder, and then goes from there. But how brilliant is the idea really? In today’s globally-connected world, the simple fact is that there are fewer and fewer ideas which can be described as totally unique. Everything is somewhat derivative of something else. However a common failing of startups is to not realize that their ‘unique’ offering is actually probably not so unique. They are in love with their idea, and then can’t understand why the market doesn’t ‘get’ it. Why? Because the startup has failed to realize that everything must be niche. Again, this goes back to educating and knowing your audience. If you know your audience, then you know your niche. There is absolutely no product or service on earth which appeals to every single person. We all have different needs, tastes and wants, and one of the biggest failings of startups is to not understand this. The tendency is to concentrate on all the ‘bells and whistles’ of the product itself, without ever questioning who needs those things.
Getting the product right isn’t merely about making it function correctly, it’s much more about having a deep understanding of the product’s place in the world, and knowing who the people are who will use the product. In our world today everything is niche: niche product, niche marketing, niche customer base, and – of course – niche funders.
Startups can fail because they think it’s all about the product. Of course the market expects the product to function, but it’s much more than that – the product must have its definable place in the world. And in many cases, surprisingly it’s not about the product. Investors are very often willing to fund projects where there is as yet not even a working prototype or system. They are willing to support a project because the team looks right, and because there is a clear understanding of the market, and the niche which will be occupied by the product. Get these things nailed and most serious investors will be ready to get behind a startup for the long haul. Instead, many startups concentrate all their firepower on making the product sing and dance, and only then do they start considering their userbase, and how to raise the funding to bring everything to launch. That’s too little, too late.
Keeping the investors
While startups may have difficulty in finding their initial investors, many also fail in keeping their investors. The education process doesn’t stop once you have prised the funds from your investors’ hands – it must go on, and on, and on. The dialog you have started must never stop, and the business must never lose sight of those people who have put their initial faith in it. That means investor management, at a high and continuous level. It’s shown time and time again that someone who has already invested in a company is likely to come back and invest some more, if they have been properly managed. Furthermore, because of the effects of Cognitive Dissonance (which I explain in my book), when people feel that they have made a good decision, they are impelled to share that with others in their circle of friends and acquaintances. A satisfied investor spreads the word, for free. A dissatisfied investor… well, you don’t want to go there.
Usually I’m an upbeat person and I know that I have a whole toolkit to offer which is proven to stimulate success for startup businesses. Nevertheless, it is sometimes useful to examine failure, and why some startups just don’t seem able to fulfill their potential and cross the finish line. I’ve outlined a few of the reasons here, but what are your thoughts?
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