(and What You Can Learn From How They Did It)
Every startup is going to have an uphill journey. Here's how you can survive the struggle.
Everyone wants to start a company. Open the doors, get your funding, then exit with a ton of cash. It may sound easy, but nothing can be further from the truth.
You will face many obstacles as a founder. Overcoming these obstacles doesn’t mean your startup will be a success, but it does put you on the right road.
While we can dissect failure essays all day long, I thought I would focus on some recent success stories; their struggles through the early stages and what they did to overcome them.
Explaining your value to potential customers
Letting potential customers know what you have to offer sounds easy, but it is common for startups to fail because they are unable to deliver their message.
Ovid is in the business of life settlements, something most of us have never heard of. In a nutshell, they help seniors sell their existing life insurance policy to a buyer for an upfront payout, avoiding loss for the policyholder, who often lets it lapse.
“Starting out, our biggest challenge was learning how to clearly communicate our service to potential customers -- another way of saying we were looking for product-market fit,” says Ovid co-founder, Lingke Wang. “A life settlement is by nature a complex financial product that not even many insurance agents -- let alone consumers -- know about or understand.”
“When we started, the industry primarily relied on life settlement brokers to handhold a consumer through the process. Handholding is great, but it is also quite expensive and inefficient. So, we saw a major opportunity to use software to replace the functions of this hand-holding and brokering. But how do you communicate this product online within someone’s attention span?”
Wang adds that the company also narrowed its focus to a specific target audience -- senior citizens. That way, it could overcome the communication hurdle by perfecting their pitch to one group.
“We would come up with multiple ways of explaining our service and then test it on our grandparents and their friends, test and repeat.” adds Wang. “It not only improved the clarity of our pitch, but also helped us prioritize information which at the time seemed counterintuitive. Over time, our findings led us to develop a library of educational content that helps walk consumers through each step of the process. Today, not only has our content become crucial in converting customers, but is now also helping to drive new traffic and opportunities to our business.”
Getting investors on board
Great ideas should easily attract funding, but that is not always the case. The same even holds true if you are a venture firm taking on new investors. You must be able to explain to investors how they will make money from their investment. If you don't, then don’t expect them to write you a check.
“One of the toughest challenges I had in the beginning was explaining to investors exactly what we do and how we make money for them,” explains JP Marony, CEO of alternative investment fund Harbor City Capital Corp. “The reason for this is because it was such a new business model or new approach, not the fact of generating leads and not the fact of generating investment returns but the combination of the two. My strategy of digital marketing arbitrage was something, as far as I know, no one else has ever done.”
Marony adds that, while your business model may sound simple to you, potential investors may not see it that way. You need to be able to break things down for them in a way they understand. As an alternative investment company, he had to come up with a way to show people how they make money off their investment.
“This is the simplest way I was able to explain it to potential investors,” adds Marony. “You buy advertising on the internet, send people to a page and when they fill out a form, you get paid. The difference between what you spend and what you're getting paid is your profit, which you use to pay your investors. But, it took me quite some time to come to even that simple of an explanation.”
Deciding whether to raise money or self-fund is also a challenge that many entrepreneurs have to think about, even if you have interest from a few successful VCs.
Take, for example two entrepreneurs I met in India who are eating, sleeping and breathing the self-fund lifestyle. Shivani from Buon appetite tells me that self-funding gives her the ability to pivot the direction of the company as needed without the hindrance of investors breathing down her neck.
Similarly, Rahul of Eves24 mentioned that he didn’t want to wait for an investor to give him the capital necessary, but rather wanted to start growing the business from day one.
Making yourself known in a crowded market
It’s not easy to enter a marketplace selling widgets when everyone else is selling widgets. Oversaturation of same or similar products can often drown out new companies trying to bring a product to market.
“It may appear that certain industries are so packed with competition these days that it's hardly worth jumping in,” writes Kelly K. Spors on Entrepreneur. “But, don't let a crowded market deter you.”
A crowded market should not prevent you from becoming an entrepreneur. In fact, Spors adds that you really just need to find a competitive edge in order to break through. Companies who have found a way into crowded marketplaces have done so by trying to be different from the get go.
“At its outset, we wanted to be different,” says wearable technology company GOQii founder, Vishal Gondal. The company makes wearable fitness trackers and reported that it sold more than 2.5 million units in 2016. Now, while wanting to be different is a great plan, doing so can be harder than expected.
“[Being different] proved to be rather difficult,” adds Gondal, “being the strict space the company operated in. There are many groups in the fitness band industry and many of them are much bigger than we are.” Gondal found a way to set themselves apart from the bigger players by adding personalized features and a lower price -- two things that people purchasing wearables were asking for.
“GOQii was able to differentiate the fitness band space by providing personalized coaches that track your workouts and comments that helped push you to succeed with your fitness goals,” says Gondal. “We also added monitoring by professional trainers. All for a lower cost than any traditional fitness coach would be.”
In the end, GOQii focused on what customers in the wearable industry were asking for: lower prices and personalized features. In doing, the company was able to grab market share from others who were slower to respond to what people were asking for.
Written by: Chirag Kulkarni
- Entrepreneur and Marketer. CEO of Taco.