a log book of my journey to the stratosphere.

Don’t start-up, run a business

 “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.”

Paul Graham writes amazingly well on what a start-up is here. The opening sentence covers his view. The process of building a product, and the to follow up to build a start-up, is covered brilliantly in the form of digestible literature – from Paul Graham, Ash Maurya, to numerous others.

Numerous product designers and start-ups today, rather than building products, are indeed only designing features. The essential difference here is – that ‘products,’  have few dependencies when the consumer has to extract value, while ‘features are essentially add-ons’ to existing ‘other’ value chains or interactions.

Take the case of Grammarly. I believe it is a brilliant feature to have on my browser and my Word processor. It is a feature, as it is only useful when I use it in conjunction with other tools – MS Word, to which I have already paid a fee to use. In this case, Grammarly tries to utilise Microsoft’s value chain.

It’s “growing faster than anything we normally see in San Francisco,” said Jules Maltz, general partner at IVP. “We expect this to be a meaningful company in the years to come.”

Yet, I do not see a brilliant ‘product’ or a ‘business’ evolving off it, even with their SaaS model achieving such tremendous growth. Unless…

Unless, they are going to build a ‘cloud-driven word processor’ around the grammar correction feature, tuned for different users – students, screenwriters, researchers etc,  with a value proposition of de-cluttering existing dominant applications (MS Word). Or better yet, exit to Microsoft, Google or Apple, before they build their processor. Otherwise, I can imagine the competition to simply send a patch of an AI-driven grammar app into their existing grammar applications. Or worse yet, create some sort of Semantic Analytics company around all the free text they get to read from their free users.

Before, you wonder what the point of that case was. I want you to think about the founders of Grammarly in their first instance of product ideation? It is naive to take lessons from such cases, especially in retrospect, since we have no clear idea of what the creators themselves were thinking when they created this application.

More than 90% of startup fail. As much as the cycle of learning, analysing, iterating, works – it applies equally to business models as well. What you thought will make money on Day 1, is not what will bring you money on Day 40.

Build first, and then figure out. While this is all, well and good for an established company with resources, this tenet is not entirely true for a small team building something. They have to factor in the economic mechanism of making money, accounting for it, and the business model, even in the early stages. The pure imagination or hypothesis of how you’d do that, is vital for the sustenance of the idea.

A perfect example would be the case of Snap Inc. The story of its growth shows that Snap is a ‘feature-app’ that roided out in funding. They openly do admit that they haven’t figured out their model. Unfortunately, I am going to wait out till Facebook eats them for lunch.

 

I want to shine light into the attitude of today’s’ startup founders. There are numerous people taking the risk to start an internet-enabled-business, just because the potential upside is huge. A cool feature-doused-product doesn’t solve problems. Millions of users also don’t solve problems.

It’s the fact that your solution can survive the test of time, competition and economics that solve problems. It is vital to actively imagine, at least in the backdrop, an imagination, (even, fictional) idea of how you can extract money for growth. Let the product evolution, evolve the process of making money as well. It is to stress that it is important to envision quite early on how your business model, along with your product will work in a capital-driven world.

Don’t just start-up. Run a business. And here’s a video that will give you the perfect preamble to think business.

 

 

 

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