What Makes a Startup Successful: Key Criteria for Evaluating the Growth Potential of Startups
I was invited to be a jury member of this year’s Economic Times Startup Awards. One of India’s most prestigious recognition for early stage companies, The Economic Times Startup Awards celebrates entrepreneurs who take risks to successfully launch a new enterprise and inspire others to follow in their footsteps. This year’s focus was on founders who are making an impact at scale and are solving India-specific problems.
Recognizing risks is important. It takes guts to start a company from scratch. It takes determination to turn an idea into a fully-fledged business, often on a shoestring budget. We need more entrepreneurs who dare to change the world; who envision new business models, products and services and take the leap to turn their vision into reality. The companies of these entrepreneurs are accelerating India’s digital transformation and spur our country’s future economic growth.
However, not every idea turns into a business. Not every startup becomes a growth story. Here are the factors that set up a company for success based on my experience as a startup mentor and angel investor.
Tenacity and the Ability to Pivot
There are million good ideas. What makes a startup truly click is the intensity of passion that the founders inject into turning their idea into a sustainable business, supported by a team that stays focused on their mission with an unblinking eye in changing market dynamics. Passionate founders with a vision have the potential to create billion-dollar businesses. Building a company is a marathon, with roadblocks and challenges along the way. The founders should be able to stretch themselves and wear multiple caps, at least in the early beginnings. While maintaining focus is important, the founders also need to have a keen eye on the changing dynamics of their company’s addressable market. The startup needs to be agile enough to pivot when needed, to overcome challenges and adapt to market changes. Tenacity and the ability to pivot distinguishes the innovators from the laggards.
Market Size and Traction
I always look at the market size the startup targets and how the team plans to capture this market. If the product or service is geared towards a smaller market, the startup is limiting its own growth potential. At the same time, the market needs to be specific enough and cater to an unmet need. Another question I ask is, how exciting is the product or service and how fast can the excitement be translated into revenues? Showing traction is critical in the early days of startups, especially if your startup needs funding from outside investors.
Smart Use of Technology
The world needs entrepreneurs with fresh perspectives who solve today’s problems and create solutions for a sustainable future. Technology helps to identify and address social and environmental challenges. Technology is also at the core of the most innovative business models. It can create new and better ways to consume a product or service and scale up the distribution to new levels. Intelligent technologies, such as artificial intelligence (A.I.), cloud, data analytics, blockchain and Internet of Things (IoT) have facilitated the creation of entire new business models that can set startups apart from the competition.
Scalable Business Model
A company’s ability to scale determines its growth potential and long-term sustainability. While startups might not be able to address their entire addressable market from the start, they need to show how they can scale their business over time to achieve high growth and profitability. This could be the roll-out of different product features and services or offerings for specific vertical markets that generate additional revenue streams.
During the judging process for the Economic Times Startup Awards I came across an amazing set of Indian startups that have the potential to become the next global unicorns. Many of these startups use technology as a true differentiator to solve specific problems. They have the ability to reach a large pool of customers worldwide, and they have a team that can pivot quickly. But above all, these startups have tenacity.
In India, we have the opportunity to define the next wave of digital disruption. Judging by the high quality of awards entries, I am confident that together with these startups we can define the future of business models. As a country, we need to continue building a strong ecosystem that can catapult these innovative startups and their fearless founders into the next orbit.
The world belongs to risk takers who want to make a positive impact on the world and have the resilience to do so.