Avoiding wastage in startups

Building a start-up is like falling in love. You find the “perfect one”, you lose all sense of reason, and judgement flies out the door. You’re likely to make mistakes. The problem with the start-up culture is this irrational blindness, and it leaves a trail of wrecked start-ups. Everyone knows that building a start-up is tough, but many entrepreneurs are not analysing their own start-ups with enough objectivity. If you don’t want to waste your money (or life) on a failed start-up idea, then you need to ask the following questions.

The very first thing you want to do to your start-up is try and kill it. If your start-up is going to fail, like 90 percent of start-ups do, then you want it to end earlier rather than later. When you emerge into the market, your competitors will be trying to kill you anyway. Do unto your start-up what your competitors will do unto you. If you are battle tested before the battle begins, then you are in strong shape for survival. Try and kill the start-up. Will it die? If the answer is “no,” then put your heart into it, and do it.

Funding

Do you have enough financial backing to design, build, test, and market? How far will your money take you? Take a longview with your funding strategy. Your capital should include a sufficient amount to take you to a comfortable point in the possibly distant future – beyond the marketing phase.

Do you have a realistic capital requirement? Capital requirements are a big issue that you need to tackle early on. Ideally, you can build a scalable business with no funding. Is there a compelling exit strategy? Every investor wants to know how to move out of the opportunity if it starts to smell funny. As you shape your business plan, be sure to devise an exit idea for the investors. They’re going to be looking for it.

Product

Is there something that distinguishes my product/service? Why does the world need your product? If it’s not somehow different or better than the next widget, no one is going to look at it.

Do I have an innovative product/service? When smart investors look for their next project to fund, their eyes are trained to identify first movers – products that sparkle with innovation. These are the kinds of products or services that explode into industries with unshakeable power. Innovation may be a buzzword, but it’s still important.

Does this product/service solve a real problem? Successful products and services solve real problems.

Market

Are there strong barriers to entry? The barriers to entry are any obstacles that make it hard for a start-up to enter the market. Start-up entrepreneurs know that the going will be tough. It’s important to consider how easy it is for others to replicate your product, mimic your idea, or steal your intellectual property. The worst thing that can happen is to pour your life energy into an idea only to have it stolen, copied, and sold – whisking market share right from underneath your feet. Choose a niche in which the barriers to entry will form a strong defence against future competition.

Generally, the more work you do at the beginning of the start-up phase, the more heartache and grief you’ll save in the long run. It seems oddly sadistic to try to kill your own start-up – an idea that you’ve incubated and cherished for so long. Even though you’re biased in its favour, try to take a step back. Give it the cold and calculating stare, moving through each of these questions.

Source: Vanguard Business