By Ajay Batra
Startups often confuse their post-launch phase with a steady-state where they can rest easy post their herculean efforts in launching their venture. Nothing could be farther from ground reality as a majority of startups languish in a ‘valley of death’ in their early months/years, sadly to never recover and eventually to become a mortality statistic. Many startups face existential issues right after their launch while they scramble to acquire and retain mainstream customers. Additional challenges of building the right team and managing finances accrue as their identity evolves from that of a startup to that of an operating organization.
Founders are often in haste to raise funds and to scale-up. When a startup attempts to grow without ensuring a strong foundation of product, team, finance and marketing, premature scaling can be disastrous. Each of these elements must be independently solid, as must the collective, for the startup to survive today, and thrive tomorrow. Based on our work with hundreds of early and growth-stage startups, we suggest that new ventures answer the following questions in their quest for growth:
How are your customers reacting to the product/service so far?
The nascent venture’s founders must engage first-hand with customers and partners to understand their experience with the venture’s offerings. Keep in mind that customers never interact with a product/service in isolation – their experience is shaped by the quality of outreach/marketing, experience with the partners, engagement with the sales team, and the handholding provided by your technology platform and apps. Conversations with the key stakeholders often lead to product improvements, business model pivots, further market segmentation, or team changes – hence, an open mind is essential. Nathan Furr, author of Nail it then Scale it said it best, “At the heart of it, to be a successful entrepreneur you have to learn to change and adapt.” Specifically, feedback on the product/service provides deep insights into how well our product/ service is addressing real-world customer needs (and problems), and the extent to which its features are over, or under, whelming customers.
How to gauge the financial health of the startup?
A common mistake made by first-time founders is to assume all is well as long as revenues come in at a good rate. It is ‘not’ the time to allow expenses to go off-radar. During the early months of the launch, when profits, if any, are scarce, startups need to keep a keen eye on their cash burn—pay special attention to your customer acquisition costs and product development investments as you begin to service more customers. An upfront effort in setting up a financial/cash-flow dashboard can save many unpleasant surprises downstream. If you don’t have a financial wizard as a co-founder, make it a point to understand the basics—simply ignoring it or outsourcing it is too risky.