Daddy doesn't pay you to make friends - Can you blame the failure of your startup on the economy?
I think, that is also why most of us find it easier to blame this unforeseen force, rather than to just decrypt the flaws in what has been recurring for as long as I can remember.
2022 seems to have brought a shadow of doom upon aspiring entrepreneurs, the lowered valuations and what seems like a global economic whirlwind making the likelihood of a rich portfolio just a distant dream.
I don’t know whether or not to be gratuitous of the fact that, in the last 4 years I have had the opportunity to work with investors and mentors alike. And let me tell you- there’ve extended their due diligence to more than just the predicted ROI.
And it has nothing to do with the revenue.
They indulge with Start-Ups because they build forces with people.
Bigger companies transact in numbers- newer companies transact with people.
A start-up’s USP, the cause of its birth, the essence of its existence is the disruption that it brings with it. Experienced companies, on the other hand, have seen their days of minting patents by the dozen. Now, they simply bring market dominance, brand loyalty, and a ready demand- all of which can be measured in numbers.
If the golden geese try to crossover to promise a minimum amount of eggs- they will get turned into butter chicken.
Pre-seed, hence, (or the virgin goose), plays on its team, its product, and its power to disrupt, whereas anyone playing for round A and above sells their scale.
But we all know that making money takes money- and if you had the money for marketing, you’d have done it already. So how do you go about this?
Pitch for product maturity
An early market penetration plan is key.
Take for instance, one of my companies that manufactures healthcare supplements. We proved our profits, quality, and market acceptance by sending out free base ingredients (coffee, ACV, White Tea). This-
a. Substantially reduced my marketing cost (because of ready demand) all while making me a considerable spendable profit.
b. Created a ready demand for the mature-r, more ‘complex’ products of my company (an app, a cosmetic, or in my case, menstrual pills).
c. This also showed the investor that I know how to sell, and that I’ll maybe just sell of the extra stock and at least pay them back- if nothing else.
What you use to build-a-base- well, I leave that to you.
Twenty years ago, unicorns would aspire to diversify their investor portfolio by making their ultimate goal going public. Now, maybe rightfully so, start-ups drop the idea simply because-
a. They don’t want to play a game that big.
b. They want more control over the people who invest in them.
c. Speed of innovation - patenting newer technology, speed-launching products, and holding micro-accountability for the rise and fall in the market trends (try controlling the make-up removal serum market for a day. Yay data!) is “easier” in private held firms. (Or is it?)
And lo and behold, it comes as no shocker when I tell you this but, if you remove risk from the equation, and create a vanilla company- you’re going to get a vanilla valuation.