If you’re thinking of starting a business, there’s one piece of wisdom I’d like to share: build a business that solves a fundamental need in your market.
I say that having learnt the hard lessons that came with building a startup during the Global Financial Crisis. With the S&P starting 2016 with its worst performance since 2008, emerging startups may be facing similar (if not so dramatic) market conditions to those I faced in 2008.
There are fewer investors and less available capital out there willing to make a bet on a high-growth companies. It is easy to view diminishing funding options as a disheartening challenge but instead, aspiring entrepreneurs should endeavour to stay positive and grasp the opportunity to re-evaluate the core offerings of their business. If your venture doesn’t stand up during tougher times, fiscally speaking, is it something worth pursuing in the longer term?
When my co-founders and I were racking our brains for ideas, we stuck to this mantra of providing a solution to a core need of any business. We eventually settled upon Assistly, a customer service tool for small and medium businesses. It is always a better investment to keep an existing customer happy than it is to find a new one, so Assistly saw success and after a time, was sold to Salesforce.
We ensured during our time building Assistly that as the market was not as active and investors were more reserved, we stuck to what we knew would work. Any tech startup operating in the current financial climate can not afford to trial or test ideas in an unfamiliar field. In those early days of Assistly we had to be more cautious with our decision-making than we might have been in the last few years. We stayed clear of certain risks because, put simply, we couldn’t afford to make mistakes; this proved to be a smart decision.
The Assistly team all had experience in customer service, so the core value proposition of our company was familiar to us. This ability to jump right into the value-adding aspect of the business, rather than wasting time learning on the job, was essential for our early success.
Don’t rush the strategy
We put a lot of time into the planning phase of our business, a necessary precaution if you want your first step to be in the right direction. Before pushing Assistly onto the market, we brainstormed our ideal client — social media savvy, trendy and tech based. After attracting this client, in retailer Bonobos, we trialled the prototype of our software with them.
Unsurprisingly, there were a number of gaps in our early solution that they identified straight away. Modern tech startups should be wary of rushing through the initial strategy/planning aspects of their business. It was through our extending planning/testing phase that we managed to develop an attractive product that was subsequently snapped up by ten major companies including Yelp and Twitter. Once we had secured enough business to support ourselves, it was time to seek investors.
When looking for financial backers for Assistly, we spent many months being turned down before securing an initial round of funding. The $1.7 million we secured would have been considered a seed round of funding in 2014 but at the time, it meant the world to us.
One aspect of our business that definitely helped us secure this initial round of funding was, that Assistly already had positive cash flow — we weren’t raising money without showing we could actually sell our product. The ability to be self-sustaining is the most attractive offering you can bring to the table in a funding discussion. While not always attainable, if a company can independently fuel growth before seeking investors they, you will be afforded more control over the future of the business.
The market will continue to turn and, if the last eight years have taught me anything, it is that businesses need to be built on fundamentals rather than growth-for-growth’s-sake. Adherence to these tenets was a huge part of me joining Campaign Monitor, a business that managed to self fund its growth for over ten years, especially in Australia, where funding has traditionally less flush.
Modern startups need not despair; startups thrived during and after the GFC, and those with the right offerings, business nous and a product that serves a fundamental need, will continue to thrive now.
Alex Bard is CEO of Campaign Monitor, the email marketing and automation software for growing businesses.