I haven’t built a startup yet, but I have spent countless hours on trying to understand how these businesses work. And I did this to eventually build a start up.
Even spending countless hours on trying to discover a model or a “formula” that helps people identify which ideas work and which don’t, you can never end up with one. Utmost, you can expect it to lower your error margin, but you can never eliminate it entirely.
Getting funded is the most obvious way to start a startup. And this is, not so surprisingly, super hard!
Yet investor’s money is still not the silver bullet that gets you set for life. Almost 95% of the companies end up failing without returning a profit. A lot of these startups even fail to recover their initial investment.
But every once in while we see startups becoming so big and significant that they compensate for all the loses the investors had incurred elsewhere.
Even the top experts on the field (the people working for the VCs) are wrong for more than 95% of the times at identifying a winner, as 95% of the startups they choose fail.
Monopolies
It is kind of depressing, but if you really want build a startup that falls under the top 1% (of all startups), you have to have an idea that creates a monopoly of some sort.
So how do you do that?
- Identify an industry: is it restaurant food delivery? The retail industry? Or any other industry that its thriving well in the economy?
- Identify the amount of money all the businesses in the industry make in a year (which is soon to become yours).
- Build a B2C or a B2B product that captures all the revenue in the industry all for yourself.
- Poof! Everyone goes out of business, and you have all their money! And the GDP numbers will never capture that change! On the contrary, it might actually go up!
The printing press, car taxi travels, hotel booking, food delivery (which was actually handled by the restaurant itself) or anything else, they all get replaced eventually.
It might seem counterintuitive, but it is surprisingly hard to destroy a monopoly, whereas it is relatively easy to take down a lot of small businesses simultaneously in a single wave.
A niche business:
Have you ever wondered how much cost you can save companies if you had actually built a software they are eventually going to build? Or at least build them a prototype or something they could ship immediately?
Employing people to build and maintain a product is usually super hard. But someone willing to do this as a business will work almost 10 times harder than an average employee. They get things done faster, because they are usually motivated differently.
No amount of salary can motivate someone to care for and work hard towards someone else’s business, than they would work for their own business.
A team of ten may take a YEAR to build a recommendation system for their e-commerce platform. But an independent contractor could have already built an MVP before (probably took him a month), which he could sell to the company saving them several months, and even cut their cost by half (if you are in the US and if you are employing a team of 10 developers, one for the front end, the back end and the machine learning part; a devOps person, with a tester and graphic designer along with someone for content writing, you might end up spending more than $1 million in a year).
B2B software which are just beautified Excel sheets
Look back at the wold before the internet era. People used papers for all forms of records. Humans were doing the things computers are doing today.
When you have a software that directly saves you on human resource, you cannot imagine how much companies will be willing to spend for that. Humans are expensive, they eat, they sleep, and they want days off!
And so came Excel, to save the day!
The tasks Excel was originally being used for are being replaced by SaaS products. Excel was built for a more general use case. Whereas, a SaaS specialize towards specific use cases restricting them to just a small segment of the market.
For this, you have no choice but to try and discover something that is already being done by a company using excel sheets (or the ones who have already replaced them with a less-than-useful SaaS, which desperately needs replacing).
The steps are simple.
- Find a group of companies that use an Excel sheet for a common task.
- Discover and jot down the processes they follow.
- Create a SaaS product with a similar workflow.
- And that’s it!
You have a company! Congrats. But these products are dynamic and they are bound to change as the use cases change. Therefore, you may have to keep working towards having them up to date with the most common use cases.
These products usually excel at providing a really easy to use UI to perform tasks that otherwise need some sort of a specialized training.
It not just saves on training costs; they also integrate with other products, and before you know it ever part of the workflow will be automated.
Large companies build more general purposed software whereas the smaller ones try to specialize
Microsoft provides more generalized service like a an SQL system or an OS, whereas most other small companies target specific market segments. The larger you are, the more broader the market segment you can target.
If you are a small startup, you usually focus on more narrower markets. Larger companies can win on providing a common service, as they have a better brand trust, and a lot of money at their disposal.
One way they differ from the relatively smaller ones is they can’t provide more personalized services.
The people with the most power in a company are usually at the top. The longer it takes to reach them, the harder it will be to convince them to fine tune the services to a niche.
But this is not the case for smaller companies, who can easily reach their executives.
This gives them an unusual advantage that lets them pivot and provide their clients with more personalized service.
Sales
This is all about the numbers game. The likelihood of meeting someone who will be willing to pay for your product will increase as you visit more number of people.
You may just have to keep cold mailing, until a business actually finds your product interesting. B2B sales are hard.
For the case of B2C, you may have to either spend a lot of upfront cost acquiring a lot of users, or you may have to create public outlets like YouTube channels or blog posts to drive traffic to your business.
Specifically in the internet world, it is all about getting the eyeballs to see you.
Conclusion
I don’t really know if my ideas for a business will work. But I truly believe in my skills, which is what is helping me move forward, even when faced with uncertainty.
At least I can report on how my business ideas worked out in a year or so!
Dear reader,
I’m trying to save up for my startup, and if your company ever has a need for a remote contractor who is really good with building highly scalable microservices, and adapts quite well to new technologies, please consider hiring me!
My email: sreramk360@gmail.com
Also please feel free to contact me for any reason! Let’s keep in touch!
My general purpose recommendation system (the SaaS product I’m building) will (most probably) be done by the end of August this year. Please email me if you are interested in hearing more about it and want to track its progress!
Regards,
Sreram K
Let’s connect on LinkedIn: https://www.linkedin.com/in/k-sreram-a04a90b7/
