The new reality

Currently it’s not for the fainhearted to follow the developments on the worlds stock exchanges. 15 years of bull market has been replaced by an ugly bear which seems to send anything with an incling of tech down, down, DOWN in the market. Well, it pretty much sends everything down to an extend where it can resemble a stock massacre. 

The development in stock quotes is not interesting in itself – things go up, and they come down again. What’s interesting is the shift to a new reality that the movements are an indicator for; the end of ‘free’ money, rising inflation, rising costs of production and a shortage of both key components and talent. It is truly challenging times. 

In the face of such adversity, you can be forgiven for giving up and just wanting to bury your head in the sand until this whole things blow over. Because how do you cope, let alone adapt to this new reality? Most of us have never tried anything like it, so we’re in uncharted waters trying to learn how to swim before we drown.

But it’s exactly when you have to develop a key ability in an instant that you’re perhaps the most capable of doing so. There is just no workaround. So when the immediate shock gives way, it’s time to assess where you are, and what all this means for you and your startup and start adapting to the new normal. And I think there are a couple of things, you need to address and get used to.

First of all, you need to control your burn and your business fundamentals. The good times where it was growth at all costs, and nobody cared about the cost are over, as far as I see it. Going forward there will be much more scrutiny on your commercial model, and whether its viable or not. If it is and you can prove it to investors, you will still be able to attract funding to grow and seize opportunities (more on that in a bit) that may present itself. Furthermore you avoid getting into a situation where you need to raise new funding with your back against the wall. That’s a bad situation to be in in general – now it’s just plain terrible for you. So don’t go there. 

Second, be aware that a lot of the ‘smart’ growth tactics you have deployed in the past and probably semi-automated probably won’t have anything near the same effect anymore. Your customers don’t have the same spending power or urge to spend, as they had before, and you will most likely see cutbacks towards skipping things that are considered non-essential. And let’s be honest; a lot of what’s available out there are non-essentials that few customers would truly miss, if they had to cut it. 

With that there is also an opportunity. An opportunity to put your automated growth machine on the back burner and instead spend some time and energy on talking to customers face-to-face, listen and really understand where they are at, what they truly need and how your product applies to those things. You wan’t to ensure that you truly understand how your product is truly – and please don’t blow smoke in your own eyes here – essential for them, so you’re still considered valuable and thus they will continue using and paying for your product. 

Willingness to pay is going to be the only metric that matters here. Forget about most other metrics right now. If you can’t get your customers to pony up the cash for what you provide and have them continue doing so, you have a serious challenge. It’s that simple. 

The benefit of this simplicity is that once you get this right, you will know that you have the strongest possible foundation that will pretty much insulate you and your startup from market turmoil. You will know for a fact that what you do and deliver is essential to your customers, and that any future downturn will hurt a lot of others before it hurts you. 

Knowing that is priceless. It allows you to get a bit out of the crisis “all hands on deck”-mode and start thinking about the future and pursue interesting opportunities. What do I mean by that? Could be that one of your competitors don’t have the same stamina that you do and suddenly provides an opportunity to consolidate. Consider it. If it makes sense, and you can get the financing right, consider doing it. Exploit the crisis of others for your own benefit. 

Do whatever it takes. And understand down to your very core that this is a new reality we’re looking and have to operate in.  

(Photo by Tobias Bjerknes on Unsplash)

The complexity trap

One of the great privileges of my job is that I get to meet a lot of different startups and their founder teams and hear about their ideas, and how they have the ambition to take on the world and conquer it.

Among these great people are also seasoned veterans trying to turn great insights into new startups with, based on pure logic, really interesting potential, but who still seem to struggle raising the necessary funding to take off. And when I come across them, I wonder why it is that they struggle, when everything else seems to check out?

Of course there can be an element of timing. They can be too early for the risk profile, an investor has, or they can be doing their work outside the field of interest to the investor. That all makes a ton of sense. But I think there is something much more fundamental at play.

When I look at what make investors tick, it is things that either cater directly to the particular interests or experience of the investor in question or just seems like a super easy sell in the pitch deck; a story which everybody can understand and relate to.

Let’s face it: As investors we look at a lot of different pitch decks, and I think it’s fair to say that it’s easier to remember and get excited about those with a really compelling, easy-to-understand story that seems like something you have heard about before, than it is connecting to a complex pain and an even more complex solution for something, you have little personal relationship with.

Remember, investors are not experts in everything. Some aren’t even experts in anything except investing (which is also an essential skill, to be sure). And they are not particular fond of being put in a position, where they are reminded of all the things that they don’t know.

When that happens, the lack of insight by experience translate directly to a feeling of increased risk, and instead of getting into a complex discussion, it’s just easier and less painless for the investor to say ‘No’ before the discussion move too far.

And it makes a ton of sense too. Because when you look at startups trying to solve complex problems for complex customers, there is a myriad of questions presenting themselves:

How will you position the product towards the customers? How will you engage in the dialogue and show that you can be of value? How will you onboard users? How will you make them stay? How will you facilitate the necessary changes to the way the customer works in day-to-day operations in order to have the full impact of your product (if it’s a B2B related product, of course) etc. etc.

There are just so many complex moving parts that it more than compensates for any great team or idea. Because as an investor you know that a lot of things have to go the right way in order for this startup to be truly successful. And we are generally not looking for cases where a lot of factors align in the right way, before the startups, we invest in, can become successful.

It’s perhaps a bit brutal and to some extend a crying shame. And the obvious risk of it all is of course that brilliant startups founded on the ‘wrong’ complex pain and solution won’t get the funding they need and thus won’t be able to have an impact on the world and ultimately be successful.

But I just think it’s collateral damage to the way that a lot of investing in startups happen; unless you’re lucky and you have that influential person on the investor side, who has insights gained through experience and just knows that the solution has real merit, you as a founder can have a hard time of getting your startup funded.

So, in essence, the best piece of advice, I can give you, if you’re a founder with a less compelling ‘simple’ story to sell is to really spend time on finding investors – angels, VCs – whatever who has the hands-on background and experience that will make them truly see the potential in what you’re doing and sign off to help you achieve your vision.

Because for complex solutions to complex issues you not only need investment – you also need real hands-on help making it happen.

(Photo by Timo Volz on Unsplash)

The right experiments

When you’re experimenting with new technologies and new ways of doing things, make sure that you get the order of sequence right.

Don’t fall into the trap of experimenting based on what is easiest from a technology point-of-view. While it may seem like a great idea and a good way to get started and move ahead with speed, the big risk is that you’ll be working with solutions looking for a problem rather than the other way around.

Instead look at the problem, you need to fix. And then start to consider what needs to be true from a technology point-of-view before you can start fixing the problem and bringing an actual solution to market for customers to give feedback on. That will dramatically increase your chances of getting out there with a real solution.

Will it take longer time? Yes. Will it me more cumbersome? Probably. But it’s the best way to go in order for you to ensure that you get real value and not just fun out of your experiments.

(Photo by Nicolas Thomas on Unsplash)

Easy to buy

When you’re building something to solve peoples problems, it can be tempting to build feature after feature and try to sell them all to the customers at the same time.

What often happens is that it can be hard to get the customer engaged in a dialogue or a trial – simply because you’re overwhelming them with information about features, solutions etc that they have a hard time figuring out whether your product is actually a potential solution to the key problem you have.

As an alternative, you could start smaller. Start by telling about one thing that matters to a customer segment, who you know is experiencing the problem. Use that as a way of engaging in a dialogue or a trial, from which you can build from, upsell and secure an ongoing relationship to a future happy customers.

Start small. Be easy to buy. And then take it from there.

(Photo by Andrew Ling on Unsplash)

Make a choice

You and your company can’t be all things to all people. You need to choose.

That’s always the first thought that strikes, when I hear of someone looking to build a multi-purpose product for a potentially big market;

Jack of all trades, master of none.

My rationale is that when you’re going for several and quite different use cases all at once, it becomes increasingly hard to communicate to your customers, why you’re exceptionally good at serving exactly their needs and get them to spend the cash on your product or service.

Chances are there will always by a small number of focused pure players who do a better job at solving the customers problem than you do with your ’80 % fixed’ approach (which is in essence what you communicate when you say “We can do all of this” instead of “We just do this”).

The argument can be a bit counter intuitive, I know. Because many will think that with more use cases come more opportunity to make an impact and be successful – not less. Alas, the devil is in the detail as hinted at above.

The contrast to the ‘one size fits all’ approach is to look at where the biggest addressable, focused market is – and then go after that big time. Yes, you will be doing one thing (you get my point, I am sure), but you will be focused, and the opportunity will be there to serve customers who are not seeing “A bit of this, a bit of that” as the solution to their specific problem(s).

Agree?

(Photo: Pixabay.com)

Understand the root cause

Sometimes you can be so blinded by a specific solution to a problem that you completely forget what the root cause of the problem was.

When people are facing challenges of some sort, they seldom jump straight to very specific solutions to the problem.

Instead they dwell at the problem for a while – short or longer depending on problem, person and context – and then they start looking for A solution.

Now, the ‘A’ here is important. Because it implies that most times there are more than one potential solution to any given problem, someone might have. And every possible solution is an opportunity for you to be relevant.

It may very well be that you don’t have the most fancy solution. That your technology is not the most unique. That your solution is not the cheapest.

But does it ultimately matter if you’re the one of the options who have understood the root problem best? Are best at showing empathy? Best at using that empathy to lead people in the direction of your particular solution, when the search for a solution kicks off?

Maybe? Maybe not?

The point here is not to be too fixated and even fall in love with a particular solution. Chances are that before you’re able to get that fabled solution out in the market something will happen that makes it less relevant, non-happening or it just gets overtaken by someone else.

Someone who just understood the root problem better.

The above is not to say that you shouldn’t be focused and bold on bringing new solutions to market that can change how big problems get solved for real people. Of course you should.

But it is to say that you should never forget to make sure you understand the root cause of the problem, and by doing that keep your options for viable solutions open and pursue them as you see fit.

Doing that will greatly increase your odds of succeeding and – most importantly – drastically reduce the risk of running into a dead end.

(Photo: Pixabay.com)

Arghh, it’s good enough

“They will love it, when they see it. And they will realize that this is just what they have been waiting for.”

Trying to build something for a market that’s nascent is super hard on so many levels. Yet, it is also one of those areas where time and time again, I meet founders who seem determined that their novel idea is going to take the world with storm, once they unleash it.

It is almost as if the future customers have just been waiting for this new breakthrough. Without knowing it of course.

Reality is it seldom happens that way.

Breaking into a new market let alone creating a new market and a demand in it is super, super hard. And founders who think it’s just a matter of making the technology work are doing themselves and their chances for success a big disservice.

Because what you’re up against is the most dreaded practical barrier of them all:

Good enough.

While they may not be using the optimal solution today, maybe what they have just works for their needs.

Maybe they have become so accustomed to nothing happening in this particular space, that they have stopped looking or even hoping for something better.

Maybe their habits are just so engrained in them that the very thought of doing something in a novel way is somewhat frightening.

The point is that there could be a lot of reasons but that the end result is the same – for the time being:

What I have is good enough.

Overcoming that dreaded barrier is not only a question about making technology work. It is also – and perhaps to some extend more – about packaging it right, getting the message right and getting it out there in front of future customers using the right channels at the right time.

And so much more.

The real important lesson here is that although the opportunity can seem huge, and there seems to be a big void in the market for something new, getting something new going in that void is going to take skill, experience, muscle (aka money) – and some degree of luck.

Don’t ever underestimate that job.

(Photo: Pixabay.com)

Attacking a problem

There are two types of problems, you can pursue solving, when you’re trying to build a startup:

You can go after a problem that is really obvious and outspoken. Or you can go after a problem that is non-obvious but nonetheless exists.

If you go after the first, chances are that you will be far from alone in pursuing it. Especially if the problem is big, painful, and the market opportunity is big enough. While competition is by no means bad per se, it adds another level of stress to your journey than those that are already inherently present.

If you go after the latter, you may be more alone in the space of your choice. On the other hand you might also need to spend more time and energy activating the market, as your target market will be so accustomed to nothing happening that expectations that anything will ever materially change are low.

Both choices of direction of the journey comes with opportunities and pitfalls for you. You can succeed in both – and you can fail in both. It is mainly a question about what ends up becoming the decisive factors.

What you however can always do is to make sure that you understand your market, your future customers and their pains related to the problem, before you just dive head in to create your solution.

No matter your approach it will de-risk the journey immensely for you.

(Photo: Pixabay.com)