Startups that operates as a company will likely face death by hanging, sorry I mean death by extinction. Every startup should refrain from acting as a company.
I am really trying to be nice with my words, but the truth will speak for itself in a few years if startups fail to act their age.
A startup is a temporary organization in search of a scalable, repeatable, profitable business model.
Startups need to go by the book when it comes to their operation.
I may not be able to define what a company is, but here is what I know:
A company is a direct consequence of a “Scalable Startup”.
A Scalable Startup here is one that has the following characteristics:
CHARACTERISTICS OF A SCALABLE STARTUP
— Business Model Found
— Product/Market Fit
— Repeatable Sales Model
— Manager hired
A Scalable Startup usually undergoes a certain transition after the passing of an observation window which can take a few extra years after customer validation.
After the transition period, a company is then born with the following characteristics:
CHARACTERISTICS OF A COMPANY
— Cash-flow breakeven
— Rapid Scaling
— New Senior Management ~ 150 people
A founder of a startup is saddled with the responsibility of searching for a business model.
He or she is expected to focus the teams energy towards research, product testing and early adoptees feedbacks.
A MUST-DO FOR EVERY STARTUP
— Customer Development:
Customer Development is the process to organize
the search for the business model.
Customer development first captures the founders’ vision and turns it into a series of business model hypotheses.
— Validate it’s business model hypothesis by using a Minimum Viable Product (MVP).
Customer validation tests whether the resulting business model is repeatable and scalable. If
not, you return to customer discovery
Every startup must get acquainted with the 14 Rules that’s make up the Customer Development Manifesto
1. There Are No Facts Inside Your Building, So Get Outside.
2. Pair Customer Development with Agile Development
3. Failure is an Integral Part of the Search
5. No Business Plan Survives First Contact with Customers So Use a Business Model
A business model describes the flow between key components of the company:
- value proposition, which the company offers (product/service, benefits)
- customer segments, such as users, and payers, or moms or teens
- distribution channels to reach customers and offer them the value proposition
- customer relationships to create demand
- revenue streams generated by the value proposition(s)
- resources needed to make the business model possible
- activities necessary to implement the business model
- partners who participate in the business and their motivations for doing so
- cost structure resulting from the business model
6. Design Experiments and Test to Validate Your Hypotheses
7. Agree on Market Type. It Changes Everything
8. Startup Metrics Differ from Those in Existing Companies
9. Fast Decision-Making, Cycle Time, Speed and Tempo
10. It’s All About Passion
11. Startup Job Titles Are Very Different from a Large Company’
12. Preserve All Cash Until Needed. Then Spend.
13. Communicate and Share Learning
14. Customer Development Success Begins With Buy-In
STARTUPS DO NOT HAVE C-LEVEL EXECUTIVES
It is popular to find startups having C-Level Officers representing different cadre of executive operations such as CEO, CSO, COO etc.
Now! This is not right. A startup that operates like this is only trying to mimick a large company which is usually due to ignorance.
This ignorance can cause a great deal of harm to the psyche of the startup; thereby not allowing them to focus on the essentials which is customer development.
Startups are expected to only have a Customer Development Team which will be responsible for executing all the nitty-gritty that pertains to discovery customers and making sure that there is a perfect product fit.
When all the factors raised in this article are adhered to religiously with precision, success is bound to be experienced.
As a startup founder or member of a startup team, remember to support your team by sharing the knowledge you have gained from here with your team.
Summary quote for every startup:
“If you’re afraid to fail in a startup, you’re destined to do so”