An acquaintance whose company succeeded in his NASDAQ IPO related to me during lunch, that in his first startup, he had over 300 competitors. After two years, there remained over 100. After 3-4 years, he only confronted 2 competitors and he exited soon thereafter. What happened to the other 299 companies? They all died. Therefore, startup survival requires growth, tenacity, and strategy. Somehow or another many companies seem to ignore this paramount objective.
One mid-Western company approached me about means to achieve faster growth in the LED marketplace. On the other hand, the Board advised that prior to expanding, the company should focus on repaying its debt. The note holder was on the Board. Translation: the company is earning enough to pay the debt slowly, but any additional growth risk might jeopardize the repayment. Situation: the technology is not exactly proprietary, so there a few hurdles to entry. The U.S. targeted customers are finite. And marketing costs are high since the sales process requires face-to-face meetings – in other words, marketing is time and capital intensive. Currently, the company has only a handful of employees. (Groupon identified similar issues and knew that for it to reach its IPO, it had to expand furiously before all other opponents. It secured enough capital to get there. Those who were late faced the consequences, e.g., Living Social suffered huge losses in its meager attempts to catch up.) Risk: a well-funded LED competitor can outbid and lock up all other customers. This startup may not survive beyond three years realistically. Yes, the debt will be repaid but at what cost? Solution: Restructure the Board. Raise sufficient capital to hire a large sales staff and focus on a nationwide campaign. When the company seizes 60% of the market, grow internationally. That is the Snap Count approach.
What this example shows that many companies lose track of their final objective – growth. And that critical direction is clouded by peculiar decision making: A board member provides bad advice that is self- serving. The leadership fails to correct its marketing strategy when its salesforce cannot generate sales after six months. A CEO did not monitor its cash burn while the beta products are not complete and the company is not generating revenue.
Again it is all about making the fewest errors in execution. And those companies that survive and prosper know beforehand what to do.