How to Identify Winning Startups
In this article, Joydip Gupta identifies the one thing that separates winners from losers in the startup arena.
Most of you know the usual must-have’s in a startup business plan. Market must be big, product should solve a real pain point, scalable idea, strong leadership team, solid execution, and so on. No, these are not the capabilities I am referring to. These are hygiene factors. Don’t start a business unless you have these in place.
But 95 out of 100 startups still fail (another 4 do ok-ish). More alarming are the VC statistics: Early stage VCs are arguably the best at reading between the lines in a startup business plan – right? Ironically, early stage VC financial models assume 6 out of 10 of their investee companies will fail, 1-2 will do so-so, and they hope 1-2 will fly. TWO out of TEN!! That’s like saying: I know 6 of my 10 clients won’t pay me, and I hope 1-2 of them pay me repeatedly 🙂 . You get my point. There is such a high risk of failure in an early-stage startup, that if you can get marginally better at predicting winners, you can get really rich.
So what does it really take to win? This is something that has intrigued me ever since I jumped into the Indian startup scene. The Internet is abound with theories and articles, most of them regurgitating the same. Over the past several months I carefully studied companies that are hugely successful to detect patterns. By the way, my definition of success is long-term success of returning value to investors. So if a startup had a string of great funding rounds with accelerating valuations but is still concerned about how they will survive the next 12 months, they are not successful yet. Most of the Indian unicorns unfortunately fall in this bucket, and the jury is still out on whether they will be successful long-term.
Key points include:
- Operational efficiency
- Economies of scale
- Quality & Customer Service
Read the full article, The 1 Thing that consistently separates Winners from Losers in Consumer Startups, on LinkedIn.