Five Key Strategies for Startups

chillibreeze writer — Shekhar Nayudu

“Starting a business is a financial and professional commitment. But even more it is an emotional one” - What they don’t teach you at Harvard Business School

Have you decided to take the plunge to be an entrepreneur? If yes, read on. But before you start to run, make sure you have given serious thought to what you want to do and how you want to do it. A good reason for wanting to start a business is because you are convinced that it will be profitable.

Entrepreneurship is all about success. A start up will require a lot of hard work and the willingness to let go some of the luxuries of life. You may hit a hard wall, but don’t give up. Stay focused and move on.

Strategy #1: Start with a strong and committed team of founders.

The first step is to ensure you get the right team of founders. Depending on the product/service offering, the founder members should include at least one subject matter expert and one business person. There are other aspects to formulating a company that have to do with proper agreements between the founder members that must be in place. IP rights to the product/idea must belong to the company and not to an individual. The founder members must be passionate and be willing to give the business all the time and attention. The team needs to create a company profile that articulates the Purpose, Vision, Mission, Corporate Values and a three year business plan. While you may start with the idea of planting a single tree, your business plan should look at creating a forest.

Once the basic structure is in place, dive straight into the core requirements.

Strategy #2: Focus on customers.

Defining the target customers and identifying their unmet needs is a good start point. Give this high importance. Test your business plan against inputs received from the customers and if required, amend it. This ensures a tighter linkage between your business plan and customer needs.

If your solution is targeted at a defined set of named customers, you may consider sharing part of your plan with one or two large prospects. Get a Non-Disclosure Agreement (NDA) signed before you do so. This way, all your efforts will be directed towards a real need and will lead you to develop a product/service that would have a ready market. Your chances of success are higher when you sell as you develop. Building a strong relationship with big ticket customers at this stage leads to a higher level of acceptance later on. You may have a great product but if the timing is not right, you won’t find a buyer for it. At this stage you may also run a market study to ascertain the current market size and future potential.

Remember: Focus on creating value for customers.

Strategy #3: Develop competitive differentiators

Once you have identified the product/service that your company will deliver, its time to look around for what is available in the market. If your company is in the unique position of being the first to market, then you’re fortunate. If not, it’s important that you find out what’s available and then create a unique positioning for your offering. The articulation of the value proposition is important. Else you may find yourself in a “me too” kind of situation. Investing some marketing dollars at this stage will help as you move forward.

Strategy #4: Generate the right source of funding.

Now that you have decided on what your company will deliver and have identified the market potential, its time to get the funding lined up. So far the founder’s contribution may have carried you, but as you get down to building the prototype, you will require a lot more funding. This may be a good time to look for an Angel investor. Angel investors are generally high net worth individuals. It will be beneficial to the business if the Angel investor is an influential person who can help you with business issues.

Angel investors work on the basis of equity participation. So you need to define the equity structure accordingly. As your company moves forward, at some stage you will need a lot more capital. This is the time to rope in a Venture Capital Fund. A word of caution – this is a very difficult phase. VCs ask for a lot of information and take their time in understanding the business risks, before they agree to part with cash. So begin this activity at the right time. Make sure that the funding covers you for a longer duration. Although traditionally this is the route most start-ups take, there is an alternate route that you may consider.

It’s sometimes preferable to approach a bank for your financial needs:

Banks insist on proper documentation and comprehensive business plans – a good check point to ensure all is right.
The loan structure is clearly defined and there can be no surprises. VC’s and other partners generally ask for equity participation.

The VC route may look attractive, but can prove to be extremely expensive in the long run. Every time you part with stocks you lose some control, besides as your business grows, the worth of the equity grows many times. Ask yourself if you are giving up a lot more by taking the VC route. Yes, bankers will ask for guarantees, but then it may work out a lot better in the long term.

Strategy #5: Build the right organization

Acquiring the right talent is essential for the start up to move forward with speed. There are several ways to attract the right people. As a start up you may want to offer stock options for some senior positions. Look for people with industry experience. Finding people with the right skill set and a willingness to join a start up is a challenge.

It is best to use the referral route – your chances of finding the right candidate are much higher. Using a recruiting agency also works well as they do a lot of screening for you. Post job openings on your website.

Most importantly, as a start-up you will need to leverage your people to play multiple roles. As you hire, make sure you take the new employees through a quick induction course and get them excited about the future of your company. It costs a lot more to rehire. Employee motivation and retention must be high in the priorities of the leadership team.

Now that you have got your act together, shift to top gear – you are now ready to run. Remember entrepreneurship is all about success and success is the result of doing things right – the first time.

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—About our writer:

Shekhar says, "I'm a perfectionist with an eye for detail. Enjoy traveling to new places and play tennis in my free time. Sometimes my cooking skills get me some accolades from my friends, but I wonder if that's one way of passing on more kitchen work to a friendly, sincere and hardworking person who has sharp taste buds".

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