Unicorns are being hunted down! Startups take cover!
The only constant in business is change — and paying customers! Lean startups with viable business models survive.
by Shadi Banna
Hypes come and go, as has been the recording of another sighting of a “unicorn” — those “rare” startups that have surpassed a billion dollar valuation. When something rare becomes mainstream, then you can expect that a hype or oversupply is taking place. You could foresee that happening when unicorns were being spotted on a daily basis.
We witness these kinds of hypes across many industries, sometimes used as a way to drive more consumption — something that is supposed to be a good thing — as it allows companies to produce more, and thus provide more jobs. This could reflect the laws of economic cycles, which in turn reflect the laws of nature — as the seasons alternate to maintain a state of equilibrium. But hypes are dangerous, since they can quickly change course — just like an unexpected blizzard.
In today’s ultra fast and ultra connected world, companies — and more critically startups — who depend on hypes, can be misled into investing resources in areas that are not sustainable. This is very dangerous when in the case of startups the hype or bubble is in funding and investment, which prompts spending on unsustainable user acquisition costs, at the expense of a solid business model.
Change is the only constant in business and no matter how hard we look at the crystal ball, it’s a dangerous thing predicting how trends will shape up to be in the end.
So how can companies, entrepreneurs, and startups know what to focus on? The answer is quite simple: The customer!
The only constant in business, apart from change, is the need to have something valuable to offer customers who would be willing to pay you enough to cover your costs and to make some profit.
This is the essence of business and there is no short cut. No matter how much money is raised, if this equation doesn’t work, then you will quickly eat through the cash pile that you have — no matter how big that pile is.
Figuring out the equation is the difficult thing especially when customers’ needs, technology and connectivity are changing the elements of the equation at lightning speed. This is why lean business models that can quickly adapt to the changing customer needs are essential these days.
Here are some tips for startups that want to figure out this lean business model equation:
- Stay close to your paying customers, understanding their challenges, priorities and needs
- Learning at all levels within the company should be happening on a daily basis and affordable tools exist to help smart startups do so
- New actions and outputs from your operations as a result of this learning should be applied to your business on a daily or weekly basis
- Make sure your business model is viable and sustainable before you spend too much money on user acquisition — not the other way around
- Don’t put all your bets and cash into infrastructure or a business model that could need to be changed later — business is about taking calculated risks and is not gambling
- Don’t get distracted by the hypes and stay focused on the need to create loyal and delighted customers
So whenever you are in doubt or distracted by the noise around you, go back and focus on what you think will delight your clients. Come up with efficient innovations for your clients — whether a service, product, pricing or process innovation — test those innovations, learn from them, then adapt. This process will keep you lean, efficient and aligned to your clients’ needs.
There is no guarantee to success in business, but if you stay close to your customers and have a flexible business model you can take cover from the ups and downs of the next fad and keep your focus where it matters — with the customers, not the investors.
Note: This article originally appeared on www.potential.com