I attended Infinite Venture’s Demo Day yesterday.
A few startup’s were presenting their case and requested for funding.
Without naming names – here are just a few observations and opinions that I have on starting a startup.
Before everything else – it is so vital to identify product fit.
For a moment – just forget growth hacking, forget being the next Uber, forget what they teach you in MBA.
It is so vital to identify:
- Is there a market for your startup? If so – quantifying the number (it can be households, users within the industry etc).
- Do you have a niche offer – if you are marketing to everyone – chances are nobody will be using it. Let’s take Uber – Uber caters to mid / high end consumers who don’t drive / find driving a hassle / are sick with cabs.
- Is the problem worth paying for? Or rather would your customers pay (and how much are they willing to pay to solve the problem?) to have the problem solved.
- Is your startup a pain killer or a vitamin? – i.e. Solves an immediate need vs a nice to have
Once you can correctly articulate the above and it seems possible that there would be a market that would gladly pay for the service / product. You would need to ask yourself:
- Is this easy to scale? To grow – would I need to incur a higher cost to hire more people? Or can I use technology to automate?
- What is the barrier to entry like? – what’s so special about my product / service that is difficult to emulate. If it’s easy to start something – can big corporates just do it and move much faster with more capital?
- Can this be grown to other countries within the region? – sure hyperlocal is cool – but from what I observed – most investors are looking for something that is easily to replicate in other countries.
- Are margins good enough? If not – what is the tipping point for you to start breaking even / profit.
- Is it labor intensive?
- What is your acquisition cost per customer and lifetime value per customer?
- What is your customer retention strategy like? – and no, discounts isn’t the answer – the product / service must serve a real purpose besides just solely relying on discounts.
I met an investor a few months back and he offered me a very good piece of advice. He said (and I am paraphrasing here) – “With new technology, it’s almost unlimited what you can do – the key thing that people are looking at is how do you monetize it – and how sustainable it would be”
Personally – I take another factor into consideration – “Is your product / service actually serving the community and the world at large? Are you actually making a difference in the lives of others?”
Because if all your business does is feed people with sugared drinks and junk food – regardless of profits – I personally think you are doing a disservice to the clients that you serve. Would you feed your own child what you peddle on a daily basis?
As Simon Sinek puts it – ““People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe”