How local startups become global leaders
Linking strategy to operation
Do operational items crowd strategy out of the agenda at your startup?
Do you have people in your startup that say: “We have no time for strategy. If we miss our quarterly numbers, we might cease to exist. For us, the long term is the short term.”
Do you even have a strategy?!
You’re not alone.
Bain & Company director, Chris Zook, writes that only 12% of companies are able to deliver real growth in revenues while covering cost of capital.
Only 12% of companies are able to deliver real growth in revenues while covering cost of capital
The interaction between developing strategy and executing it through operation has a multiplier effect on a startup’s ability to perform well. To achieve peak performance, a startup needs to develop extraordinary leadership for itself as well as for the community.
Cost of capital & Unicorn maths
Venture capitalists usually target an IRR of 30–35% where the risk-free rate is around 0–5%. Adapting these to the Iranian environment where bank deposit interest rates are at 15–20% (and factoring in the lack of exit options), VCs need to achieve IRRs of 55–70%. This means that as a startup, over a 10-year period, you need to turn $1 of investment to $200.
If you’re seeking an investment of $1m today, you need to return $200m to your investors in year 10. Assuming that you’ve only raised one round and sold only 20% of your company and that the VC has no other investment in their portfolio, you need to achieve an exit valuation of $1b to make the maths work.
So far none of the startups we have seen in Iran can achieve this type of return.
This is why we’ve talked about a global strategy from day 1.
Now imagine the immense task ahead of you, given that globally, only 12% of companies can actually beat the cost of capital and return money to their venture capital investors.
Seems daunting, doesn’t it?! That’s why you’re an entrepreneur. Being contrarian and supremely optimistic is an essential part of the entrepreneurial journey.
Leadership & Planning
At Iratel Ventures Breakfast Series, we continuinally ask the question:
What gaps do you think there are in building a global startup in Iran?
The answers range from lack of funding and legal (and infrastructure) support as the most frequent ones to lack of world-class engineers and general supportive culture.
The one that caught our attention most was a simple three-word statement:
Lack of planning!
You can find all the answers in this Google Sheet. Feel free to add your comments in the Google Sheet or here in the comments section.
We believe leadership and planning go hand in hand. In order to be a true leader in the community, a startup needs to have a purpose. With a purpose, a startup can afford to overcome short-term thinking and adjust for the long-term.
There are ways to frame this purpose. I have written about this in a number of posts. Good news is, we have taken our learning from the past 24 months of investing in Global Iranian entrepreneurs and designed a specific strategy to target this part of the entrepreneurial experience. We know many startups are keen to jump into action, so this program is for those who want to explore the possibility of having a purpose and how that will allow them to achieve their full potential and execute at peak performance!
This is part of our Global Growth initiative at our innovation centre, iLab. Linking purpose to strategy and eventually operational execution and monitoring, is the gap that Iratel Ventures can fill to build global startups in Iran.
Find out more about iLab and join our membership waiting list here:
http://iratelventures.com/iLab/
This is the first in a series of posts about our global leadership support and ecosystem resources which was also posted on LinkedIn. We’d love to hear from teams with crazy (but commercial) startups. Get in touch or attend our breakfast series. Finally, don’t forget to get your IV Score to prepare for your next VC meeting.
