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Getting The Start Right

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By Shalini Prakash

Indian entrepreneurs are bitten by the tech start-up bug. The cost of starting a business is lower than ever. While this makes it an opportunity for entrepreneurs, it also means they have to tackle severe competition to survive. There are many competitors in the market and to win the race you need to play a different game.

Paul Graham said,

A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit’. The only essential thing is growth. Everything else we associate with startups follows from growth. 

Startup = Growth

In the initial days, every stage startup founder needs to focus only one thing, growth. Using the baseball analogy, you need a home run, in order to stay in business.

How to hit home runs: I swing as hard as I can, and I try to swing right through the ball. The harder you grip the bat, the more you can swing it through the ball, and the farther the ball will go. I swing big, with everything I’ve got. I hit big or I miss big.
 — Babe Ruth

Science offers valuable lessons in entrepreneurship and growth.

If you are committed to making your startup the most valuable gift you can offer to the world, remember these 4 key science laws to hit a home run.

The Do’s

Newton’s second law of motion: Acceleration is produced when a force acts on a mass.

Launching a new app? It better be huge because you are competing against a million competitors for customers’ attention. The more creative action you put in your startup, the more force will be applied in the market which could lead to real impact. The force of the new product in the market depends on how valuable you can make them and how fast you can bring them to market.

startup

The more creative action you put in your startup, the more force will be applied in the market which could lead to real impact | Photo Courtesy: Paul Cowell via Flickr

Metcalfe Law: The value of a telecommunications network is proportional to the square of the number of connected users of the system.

Every new node in the network connects with every pre-existing node, then as you gain nodes, you increase the number of connections. In the case of a startup relying on social networks, the greater number of users with the product/ service, the more valuable the product/service becomes to the community. For example, a single mobile phone in a network is useless. But the value of every mobile phone increases with the total number of mobile phones in the network, because the total number of people with whom each user may send and receive call increases.

This law is useful if you are aggregating large audiences and treating them as your communication utilities. You can reap the benefits of network effects of your product when it is valuable to your very first users, even if it is a small group of people.Facebook is a good example. It just started with the Harvard campus and its initial customers were Mark Zuckerberg’s classmates and not all colleges in the US. So, think about who is your first customer and what value are you providing to them to create network effects.

The Dont’s

Hotelling Law: An undue tendency for competitors to imitate each other in quality of goods, in location, and in other essential ways.

When one competitor makes a small change, the other competitor matches it, and so on until two products are nearly undifferentiated.

With an increase in competition, companies experience a tendency to gravitate towards a common middle ground. When one competitor makes a small change, the other competitor matches it, and so on until two products are nearly undifferentiated. This should not be your initial strategy for growth.

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To achieve accelerated growth, you should own a category or become a ‘category king’ | Photo Courtesy: audipaudi via Flickr

To achieve accelerated growth, you should own a category or become a ‘category king’. As a startup, you don’t just make something to sell to people and be another ‘me too’ in the market. You will automatically own a category if you are solving a real customer problem. Introduce the customers to a new category of a product or service that will instantly build value amplification.

Build something to replace the current point of view with a new point of view.

Remember, when you are launching your startup, Hotelling law will not hold good as your entry strategy. Build something to replace the current point of view with a new point of view. This will impact how people and businesses decide to spend their time and money.

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Startups rely on data for making major decisions | Photo Courtesy: Jason Truscott via Flickr

Heisenberg uncertainty principle: Looking at pairs of variables, increasing the precision with which you measure one variable tends to decrease the precision of your measurement of the other.

Over the years, I have realized that many startups rely on data for making major decisions. But how valuable is this data? The Pedowitz Group, a marketing agency based in the US, defines this effect in the startup context as, “You can measure what consumers will say they’re going to do, or you can measure what they actually do. No matter how closely you try to measure what they say they intend to do — such as with surveys or focus groups — it will differ from what they ultimately do. Precision in measuring stated intentions doesn’t bring you closer to insight on predicting behavior.”

The Bottom Line

Often, every startup is stuck with the data collected and change a whole strategy based on that data.

Wrong metrics and lessons from your customers could hinder you from achieving product validation or product/market fit, and hence slowing down growth. All the value the data brings will evaporate if not used or understood correctly. So use the data and metrics to support decision-making, but do not take a whole decision or judgement based just on data alone.

Be bold, find a huge pain point, become a category king, and deliver happiness to your customers. If you are lucky and find the right mountain to climb, you will ascend to the peak before others have found the right trail.


Shalini Prakash is a part of the investment team at 500Startups. Previously, she was a part of several accelerator programs such as GSF, Kyron and IDEX working with startups and entrepreneurs. 

Featured Image Credits: Süleyman Özek via Flickr

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