Starting up is hard. Most startups fail. But those that succeed can be revolutionary. The game changers uncover meaningful innovation and then figure out how to scale it.
Startup unicorns likely need some combination of focused consumer insights, helpful startup catalysts and mentors, and luck to make it.
Over the last 30 years, Alloy Growth Lab’s internationally recognized startup incubator has helped more than 300 innovative and scalable businesses launch and grow in a variety of industries. Our Startup Catalysts have seen challenges of all sorts, and the company has learned a lot since its founding in the 1980s. Here are five lessons we have seen apply regardless of challenges.
Know the market better than anyone
Entrepreneurs struggle when they lack the information they need to validate the problem they are solving. This can be a result of not spending enough time in market discovery, talking to potential customers, and understanding customer pains and gains. It is imperative to find the “need.”
Entrepreneurs need to be comfortable interacting with potential customers. Completing lots of customer interviews is a start. Hitting the pavement to understand tensions in customers’ lives will equip entrepreneurs with a keen understanding of mitigating factors that may change the market dynamics in the future.
Connect with your audiences
Startups are likely to speak to both prospective customers and investors. Connecting with both audiences is difficult. To successfully pitch to both audiences, founders need to learn how to be strong storytellers. They need to understand enough of the contextual challenges of both audiences and then speak their language to connect with them.
Entrepreneurs should take care to show why their widget solves the challenges faced by customers and investors. This isn’t easy. It means the entrepreneurs need to elevate themselves out of the weeds, avoid using jargon and acronyms, and home in on the key functional and emotional benefits they offer. In other words, the founder needs to compel the audience to care by keeping it simple. Putting too much effort into explaining what you do makes connecting more difficult.
Be prepared to pivot
Building a successful startup is a winding path. Founders don’t know exactly where they are going. They may have a general idea or vision, but the consumer will point them in the right direction. Founders must be mentally prepared for both the likelihood of failure and the possibility of success. The world and its consumers are constantly in flux. Founders must be malleable and adaptable. Unless you are extraordinarily lucky, pivoting must happen. Customers will tell you they don’t like a feature or the entire product. The entrepreneur must listen, understand, and adapt; otherwise, the company will not make it.
Financial understanding is imperative
Financial skills are often an obstacle for entrepreneurs when forecasting. Entrepreneurs’ financial forecasts are certain to be wrong sometimes, like the certainty of death and taxes. Regardless, founders need to become financially conversant or find someone who is. Using an assumptions-based financial model helps prevent unrealistic growth scenarios and provides credibility when addressing questions from investors. The entrepreneur will need to develop these skills. The best way is to get comfortable with numbers. Open your favorite spreadsheet. Build simple revenue and cost estimates. Guess how much you’ll sell and to whom. Combine them and repeat as you verify your assumptions.
Don’t hire too many, too quickly
In the very early stages, startups need to run lean, even if they’ve recently locked in a strong capital investment. A startup can only afford to pay so many people without a steady revenue stream. Plus, companies often build based on what they want to happen instead of on consumer trends. Revenue streams always take longer than expected. Minding your burn rate — which is typically tied to people — is critical.
Interested in catalyzing your business with Alloy Growth Lab?
As a top incubator, we are here to help scale. Alloy connects founders with coaching, connections, and access to capital. We help serious startups build investment-grade businesses. We have seen thousands of entrepreneurs face common challenges over our decades of experience. Our experienced startup catalysts and programs will help you navigate the investment landscape, develop a growth strategy, gain traction with the right product-market fit and connect with like-minded entrepreneurs. Our reputation can be seen through the success of our clients: Last Mile Food Rescue, Subterra, ActionStreamer, Searen, Mobility Health, Sense Diagnostics, Band Connect and Nano Catalytics. These clients have used the coaching and mentoring services of Alloy Growth Lab to hone in on their value proposition and experience growth.