Startups can overtake the rugged market by going back to basics

Startups can overtake the rugged market by going back to basics

For the first time in more than a year, global risk financing has slowed between quarters in early 2022. While change may sound a wake-up call for founders, it is in fact a recalibration after months of rounds and unusually huge ratings. This is a return to a more stable, risk-conscious VC space.

In this calm, the founders have a moment to pause, regroup and maximize resources.

Founders need to get back to basics and make sure that the fundamentals of their business are right and that they can continue to grow from those fundamentals. It’s not necessarily about the amount of capital you have, it’s about being efficient – it’s something I learned as a founder and investor through the dotcom bubble, the real estate collapse, the financial crisis and the pandemic.

Here are three ways you can do that – and stay on track.

Focus on product-driven growth – and get investors to help you

Investors will tell you that you need a one-year track available and that you should not spend too much during this time. They may recommend that you freeze your team number, stay close to customers, and explore more flexible pricing and products. However, these actions must be based on data. If your growth values ​​are expressed in a single digit, the underlying issue may be the sticky nature of the product, not the size of the team.

Hypergrowth must come from the core of the product and be largely organic. Of course, you can use marketing to accelerate your exposure to new customers, but if your budgets are tight, your priority should be to build a product that people really love.

Investors should help you understand user feedback, listen carefully, repeat your product, and launch a better version – this is essential to be driven by the product.

Put your data in order

Every business generates data in one way or another. What makes your company’s data stand out is the way you tool, visualize, and interpret it. By optimizing these areas, you can identify growth opportunities, no matter how serious the situation.

In the first months of the pandemic, travel and leisure startups had to deal with blockages that drastically reduced their operations. Data was key here. A company I work with has lost considerable revenue, but has done a thorough research of the data, which has helped them focus on the end result and continue to grow healthily.

“You should collect data that allows you to see trends before customers take action.”

In-depth analysis of the data helped the company understand which group of customers was most affected by the pandemic. For example, the rental and housing situation in California was very different from that in Florida. Identifying the most important cities (in terms of customers and regulations) has been crucial in prioritizing inventory efforts and investments.

At the same time, city travel has virtually disappeared, but nature travel has expanded. The data showed that people felt safer outdoors, in the wild, than in concentrated cities. With this explosion of alternative travel, startups listened carefully to customer feedback and made sure to respond to their new preferences.

Continue conversations with your customers

Being product driven by both B2B and B2C businesses means making sure your product always reflects the needs of your customers in real time. You just have to be more discriminating with the help you render toward other people. You should collect data that allows you to see trends before customers act.

For example, rising inflation has undoubtedly influenced the way customers see the value of your product. You should send surveys, launch contact points in the app, and meet people (virtually or otherwise). Ask your users how things are going, if they’re thinking of spending less in the coming months, if they’re having trouble paying for your product, and if flexibility helps. If the answer is a resounding “yes”, consider incentives such as buy now, pay later to make it easier for people to consume. This payment method saw an expansion in e-commerce last year, especially among younger users who preferred small rebates to a one-time purchase.

You can also consider offering benefits and discounts to suit your customers’ financial situation, but make sure that this allows people to test the product, not receive it for free. If people are new to your product and can’t afford to buy it after trying it, they won’t, and that will destroy some of the value you’re trying to deliver.

VC recalibration is not and will not be the first of its kind. Being a great entrepreneur requires you to be efficient in terms of design – which means taking advantage of calm moments to redirect the user to the center of your business. Startups that double the value, data, and community at these points will generate the most value for the longest time.

Laura González-Estéfani is the founder and CEO of TheVentureCity.

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