Most people associate startups with scaling. The media has a habit of covering startups that have secured funding and are scaling fast. Due to this habit of media, most people feel that startups are only about funding. Scaling is the stage in which the external world at large comes to know about the startup. A large part of the startup lifecycle is not visible to the external world as the startup is very small during that time. In total there are 3 stages of the startup lifecycle :
The first phase of the startup lifecycle is ‘search’. A startup needs to find a problem and some kind of a solution to that problem. A major reason for the failure of startups is building products that people do not want. Searching for a problem and creating a solution around that problem helps in providing a strong foundation to the startup for future success. This stage ends when the startup has found ‘Problem Solution Fit’.
This stage generally requires just the co-founders to work on finding the problem and finding or creating a prototype solution to solve the problem. The aim is to find a ‘scaling pattern’ which can solve the problem. In some cases, 1-2 employees can be recruited but at this stage, entrepreneurs need to bootstrap and big expenses need to be curtailed.
To explain this I would like to give you an example of a food startup. If I was creating a food startup, I would first need to find a problem of consumers. Say the problem selected is getting healthy fast food.
The 2nd step will be to search for solutions to this problem globally. The founders can also experiment with a few solutions on their own.
A part of finding a good solution will be to find a scaling pattern. Scaling pattern is the pattern language that has been found for the potential solution. Having a scaling pattern is important to understand the scalability potential of a product.
An example of a solution for a startup focusing on healthy fast food can be ‘Healthy Burger’ (wheat or multigrain bun with fresh vegetables as a filling). Another solution can be the South Indian dish ‘Idli Sambar’. Both the solutions are very different. Startups can focus on any one of them and create a suite of products around the solution.
For example, if a startup wants to create a healthy burger then it can create a menu with different kinds of healthy burgers. It can create burgers with local vegetables to suit local tastes and expand globally. It can also have multiple varieties of buns. Thus constraining the solution to just healthy burgers gives the startup the required efficiency in execution and focus. Thinking of the healthy burger as a pattern allows the startup to create a suite of healthy burgers to suit all kinds of locales and tastes.
Similarly, if the startup chooses the ‘idli sambar’ pattern it can experiment with different kinds of doughs for creating idli to suit different locales. Also, it can experiment with different kinds of chutneys (Indian sauces) to compliment idlis to suit all kinds of tastes.
A blunder any startup can do is to think that it can give 5 different types of products to consumers as a solution. If the startup provides healthy burgers and idli sambar in the same shop the logistics of providing both will make it difficult to achieve economies of scale and also create challenges in the making of standard operating procedures (SOPs). Providing 5 types of burgers or idlis is easier than providing 5 different dishes simultaneously.
Thus focus on one solution and its multiple variations can provide efficiency in execution and fulfill consumer choice. When startup founder(s) find a good scaling pattern, we can say that that startup has achieved a ‘problem solution fit’.
During this stage, the startup’s founders are generally finalized. It is generally rare to get funding during this stage and thus the founders have to bootstrap the startup at this stage. These days a startup can try to get some grants from incubators and the government under various startup funding schemes.
Once a startup finds a problem, builds some sort of a solution to the problem and achieves the problem solution fit it needs to recruit a small core team that can iteratively build a product. This stage goes on till the startup achieves ‘Product Market Fit’.
At the beginning of this stage, some angel investors can be approached for a little bit of funding as the startup has something to showcase to them since it has already achieved ‘problem solution fit’.
The startup has to create a minimum viable product (MVP) and start selling it in the market. The startup needs to focus on 2 things in this stage: ‘making’ and ‘selling’. The startup has to iteratively increase features of MVP through feedback it receives from actual users and customers. The startup has to also learn about the various details of the market like market size, market structure, the barrier to entry, etc.
‘Product market fit’ is a stage where the product is so good that consumers want to use the product themselves without much push. For example, once I used Uber for the first time I wanted to use it again and again. That was Uber’s product reaching the product market fit. This usually takes time and may involve multiple iterations to the product.
Once the product is desired by the market, it becomes easy to get money from venture capitalists and big angels and usually, it’s a good time to scale the startup. At this stage, a startup has to transform into a corporation. Many people may need to be recruited and a formal structure needs to be put into place. Uber, Paytm, etc have taken this route once achieved the product market fit.
Thus we see that all 3 stages of startups are very critical. Startup founder(s) should not try to scale from day 1 before achieving the ‘problem solution fit’ and ‘product market fit’. Therefore any startup whether big or small has to follow the 3 stages of the startup lifecycle and start with the ‘search’ stage, follow it up with the ‘build’ stage and then finally ‘scale’ the startup.
Author: Saurabh Jain (Follow him on Twitter : @skjsaurabh)
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