The following article in the ecosystem series will focus on the customers and markets. The subdomains discussed here are Economic conditions, Wars and pandemics, Location, and Customers.
Prevailing economic conditions when launching a startup would greatly influence the new venture’s success, depending on the need served. Unless it is a blatant or critical need, customers may not want to spend money during periods of recession or a slow economy. This also depends on the nature and extent of the investment. The market sentiment can also deter investors from investing even if the startup is a promising one. On the contrary, even an average startup may get funded when the markets are booming. This becomes a challenge, and while entrepreneurs cannot predict the market swings, they can always use the slowdown to incubate the idea and prove the business model to be ready for the investors when the markets recover. This could be a strategic move for a startup.
Wars have always impacted regular businesses, but they usually opened new entrepreneurial opportunities. The resource crunch and other security measures imposed by the government can be turned into new opportunities for entrepreneurs who can sense and leverage them. A lot of new equipment and supplies would be required for the military, and the existing businesses can pitch in to support. Pandemics and large-scale medical emergencies offer similar opportunities. During the recent Covid-19 pandemic, many entrepreneurs started manufacturing sanitary equipment, personal protection equipment, testing kits, and masks, meeting the global demand. While close to 80% of the businesses suffered, a significant number, around 20%, were able to grow 100% to 500%, according to some industry surveys. This was possible only due to the entrepreneurs’ ingenuity and ability to leverage their core capabilities and resources.
The location of the new venture contributes significantly to the venture’s success. Along with the resource availability and skilled talent pool, the local regulatory institutions exert much influence. However, research showed that entrepreneurs do not consider them as barriers and usually find a way to manage them or work around these constraints. This is a significant insight into the entrepreneurial mindset. Factors like connectivity, logistics infrastructure, ease of access to talent and advisors, and a thriving ecosystem with advisors and investors play a crucial role in new venture success.
Customers are a critical success factor for any new venture as they define the market size and profitability. While a startup is launched with an intended customer segment, there will be a discovery phase where this segment gets finetuned, pruned, expanded, or even completely changed. This is the learning phase for every new venture where there is a mutual value proposition discovery. Every startup gets punched in the face as its assumptions get thrown out of the window, and they come to terms with the market and customer realities.
The cocreation of products and services is a great opportunity that covers early validation and testing of the product before launch. This will also ensure that the new venture has enough realistic feedback and real-time use cases to establish a value proposition. Watching the customer use the product can also generate critical insights that help in the design thinking process to create better products and services that would wow the customers.
Another emerging concept that directly involves and engages customers is crowdfunding. By asking the end customers to invest in product development early, a new venture can reduce its funding needs and scale up quickly to deliver its products. This also results in sales revenue instead of just funding. The process of crowdfunding involves developing rapport, credibility, and trust with target customers so that they become willing partners in success and growth.
These are some of the aspects in terms of customers and markets that help new ventures succeed.
About the Author
Flt. Lt. Sridhar is a Startup Ecosystem Builder, Keynote Speaker, Author, Researcher, and Entrepreneur. Sridhar’s mission is to help Entrepreneurs and startups achieve incredible success through exponential growth. He brings insights and lessons from three decades of hands-on startup and business leadership experience in various verticals. Sridhar uses six different thinking processes, including systems thinking and design thinking, and helps entrepreneurs create breakthrough solutions through his unique coaching process. Sridhar launched and ran four businesses. He is a certified Startup Mentor from the Confederation of Indian Industries.