Can startups succeed in a recession?
This article originally appeared in issue 30 of IT Pro 20/20, available here. To sign up to receive each new issue in your inbox, Click here
The range of challenges faced by startups is wide and many factors must be mastered to be successful. Economic downturns can make an already difficult situation even more difficult, with the UK set to endure an incredibly turbulent few months. Uncertainty, however, can bring positives to startup founders eager to seize the opportunity and launch their big idea. However, it is useful to be aware of the special attention that an economic downturn may require.
The primary of all factors is whether your offering is needed in the market and whether it fills an identified gap. “Having a market edge when the market is struggling is even more critical to the success of your business,” said Jordan Dargue, board director of NorthInvest. IT Professional. “You need to know what your competitors are doing and what their strategies are.”
There are a litany of other factors that startups and potential new ventures need to be aware of when considering launching their business in difficult economic circumstances, including staying focused on the ultimate goal and the will to do in the face of uncertainty.
Being laser focused is more important than ever
It goes without saying that startups must always have strong focus, drive and commitment to succeed. At a time of uncertain economic prospects, these factors are even more important. While a solid business plan is essential, investors may also be interested in the team itself, its vision, and its potential. As Drague says, “investors are investors for a reason.”
“They take a lot of fun and satisfaction out of supporting businesses and supporting the economy as a whole,” he continues, adding, “An investor will often guide a business on what they need to prepare to get investment.”
Still, it’s really important for a startup to be able to speak knowledgeably about its unique selling points, and for Henrik Landgren, chief product technology officer and co-founder of ArK Kapital, and former vice president of the Analytics at Spotify means paying attention to data. “You need to be in control of your data,” he says Computer professional.
“During a downturn, all indirect factors go out the window and eyes are fixed on the data. This applies to how you manage your operations to how you craft your pitch decks. My advice for the latter would be to reduce the narration parts and compose on the story of the data.
Key success factors are essential
Startups must always understand the market they are entering, which means they must focus on customers from the start. Isabelle O’Keeffe, partner at venture capital firm Sure Valley Ventures, says IT professional this is even more important in the current climate, saying, “Founders should regularly speak with potential customers and research the impact of certain factors on their supply chains, purchasing decisions, business models and their income generation. This, she adds, allows the startup to “discover ways to tailor its product or sales approach to the customer and could be the difference between getting those first customers or not getting any.”
Support, whether it’s financial advice, paid advice or the help of knowledgeable networks, is absolutely essential, and even in a time when money is flowing freely, it will help entrepreneurs stay focused on what who counts. When funds are limited, getting the right help at the right time is essential and it pays to be prepared. As Jordan Drague says, “Already make sure you have an advisor who can provide you with the best advice as and when you need it.”
Essentially, when money is tight, it’s more imperative than ever to “fail fast.” Henrik Landgren sums it up succinctly: “The best entrepreneurs are nimble and equipped to face uncertainty. They are the ones who raise the sails in the storm and come out of it.
While startups have to juggle business planning, getting the right technology in place, financial management and planning, and unless they’re very new, they actually provide a service, they don’t must never forget the importance of taking care of their team. Isabelle O’Keeffe concludes: “In this environment, it has become more difficult to attract exceptional talent and when building a team, it is important that you are transparent and open with your current team, and that you take them with you. ”
Five guiding principles for startups in times of financial difficulty
- Be sure to fill a gap in the market and shout about it.
- Know where the support is and tap into it whenever needed.
- Talk to your customers. Knowing where their weak spots are will help you help them.
- Focus on data to help make a strong case for investors.
- Take care of your team. In tough economic times, good talent can be harder than usual to recruit and retain.
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