How to Position Your Start-up in a Changing Economy

Crowdfunding

Our current economy can be characterized as an imminently changeable culture of consumption, fascination with technology, and globalization. With enhancements in communication and the spread of globalization, never before has the startup / entrepreneurial culture been more welcomed. Whether you are a Silicon Valley startup, SafeMotos in Rwanda, or MeQasa in Ghana, or a woman in China with an internet startup, the rules are all the same.

Most startup companies exist to commercialize novel technologies, products or services. They exist to fill a primary need in the world. There are, however, large numbers of startups that exist to commercialize related and associated technologies. I call these secondary startups. We see this quite often in Silicon Valley where a thriving startup turned “mega-company” such a Facebook, attracts other “bolt-on” type startups. In the case of Facebook these secondary startups provide products or services to support or enhance or piggy-back on the Facebook technology or a Facebook user’s experience, such as the myriad of advertising companies that specialize in creating ads to place on Facebook.

There are also those “tertiary” type startups that provide support or services to the primary and/or secondary startups. Software, manufacturing or even cybersecurity providers target the primary or secondary startups as a means of new business creation. There is also yet another category, the “me too” startups, such as the early Facebook competitors or what exists today with LYFT and UBER.

So while opportunities abound, and multiple types of startups are possible, the one thing they all need to survive in this rapid moving, changeable, ‘Chameleon-like” economy is FLEXIBILITY. As defined by the Oxford English Dictionary flexibility is:

1) The quality of bending easily without breaking.
2) The ability to be easily modified.
3) Willingness to change or compromise.

I often find myself as a judge at a “shark or dolphin tank”, places where entrepreneurs showcase their company or technology in hopes of receiving funding. I am also heavily involved in mentoring other entrepreneurs. In the course of this work the most common mistake I see, almost disproportionately, is a founder managing or directing the company to a specific exit. This is especially true in the biotech sector where clinical trials are long and expensive, and even if they are successful, they are subject to regulatory scrutiny. This can also be found in startups in other areas including classic tech where the founder says, “Facebook will have to buy us if we get big enough or if we pressure their products sufficiently.”

Lets take COMPANY A run by Mr. Entrepreneur who has a unique technology that treats atrial fibrillation (AF). He decides to raise 20% to 25% of what he needs to do full clinical trials to provide sufficient data for FDA to support a product approval. Knowing that Biosense Webster and Medtronics are major players in the AF market he tells investors that his Company will likely be acquired by one of these companies in 18-24 months after proof of concept, or after limited clinical trials. This “specific exit” strategy has little to no built-in flexibility and leaves little room for things that cannot be controlled such as Medtronics and Biosense Webster developing similar technology, or their moving out of the AF market. Additionally, the presumption of a timed acquisition in the very early stages and even further down the road does not account for proof of concept failure, the need for additional funding or other hiccups that ALWAYS occur.

While investors need an “exit,” managing a startup to a specific or pre-determined exit too early ignores the significant risk that it creates for the investors, as well as for the technology itself.

Carefully examined, each of the defined qualities of flexibility becomes so important for the startup. Here is my advice:

1) Be able to bend without breaking. Practice “corporate yoga”.
2) Design your technology, product, or service, to be
EASILY modified (with respect to time, cash, and focus).
3) Have a willingness to change course, or to compromise with the marketplace, with investors, and suppliers to achieve your objectives.

In these changing economic times FLEXIBILITY is your greatest asset as you position your startup. Remaining flexible ensures that your technology/product/service has the highest chance of success.

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