The start-up drug ...and avoiding the comedown

20 Nov 2018  |  Craig Wills 
The start-up drug ...and avoiding the comedown

There’s a very significant role classical brand thinking can play in changing the odds for start-ups, writes Craig Wills

All those invested tech start-up billions. I wonder, is our 4th industrial revolution running the risk of being sucked into a black hole of impromptu optimism and giddy hubris?

Facts have a habit of speaking for themselves. The fact is that over 90% of tech start-ups fail. Don’t think of them in just percentage terms. Think of them as a line out. That’s 9 out of 10. Where each of ‘The Failing 9’ leave an average of $1.2 million in debt on their balance sheet.

Put simply, and starkly, to survive you need to be ten times better in all you do.

Not a day goes by without another headline grabbing start-up “en route to unicorn status”.

Unicorns, so named for good reason. Rare, mythical, seemingly unreal.

The ‘1 in 9’ start-up failure rate runs pretty consistent across tech and ‘other’ embryonic businesses. Whether your sweet spot is technology, futurism, AI, predictive learning coupled with access to the most rampant investment companies in the World, no one blue-eyed darling is an automatic passport for success.

Which leads me to more wondering: are large ‘blind leap of faith’ investment sums being written off when potentially some relatively simple upfront re-wiring could seriously help the prospects of any start-up? I believe there’s a very significant role classical brand thinking can play in changing the odds.

I’d firmly argue that any start-up that understands its brand purpose and ‘Reason to Believe’ is getting more than a hop on its fellow start-up competitors.

To successfully navigate from one funding round to the next, being brilliant at the basics should not only still count, but arguably be more paramount than ever. Grounding details such as defining value proposition, ARPU, and customer value.

Let’s be clear. ‘Generating revenue’ and ‘securing funding’ are not the same. Gateways of funding should be utilised to drive sales growth, not just keep the lights on, to hobble to the next funding phase.

However, the core reasons for start-up (9 in 10) failure are rarely anchored in the mere execution, more so in the bedrock foundations of strategic thinking (or lack thereof) that informs those executions and actions.

It’s very ‘now’ for every design agency, creative agency, change agent and advisor to try and get closer to the start-up action, and provide ‘support’.

There’s a responsibility within that to provide the right kind of third-party support, and provide expertise that’s valuable and beneficial, as opposed to merely feeding off the beast.

Technology which underpins a new offering is just that and no more. It’s the foundations. Your house needs foundations, but try rolling out your sleeping bag on foundations alone. Tech is not the master. Tech is merely the engine room and so building out further ‘stacks’, ‘versions’, ‘upgrades’ is great but only if the demand and revenue is in place and the market/user appetite is tested and whet.

It’s reported that the failure rates for tech-based business drop from 90% at inception (homed in the garage/bedroom/café and ran from the credit card or family funds...) to 40% once Series A funding is in place. The percentage drop-off becomes friendly thereafter. A 75% success rate by Series B, followed by 95% once Series D is in place. A near inverse of the inception stage.

This of course makes simple sense of investment mentality, but also begs a question. What needs to be in place at the beginning, on ‘Day 1’, and do most start-ups leave some business and brand fundamentals until it’s too late?

Let’s get constructive in all this. The power of knowledge, and the positive impact of skills exchange between start-ups, agencies, advisors and financiers can go a long way to bettering the odds of success. The right ‘agency smarts’ brings brand focus and subsequent competitive advantage to the start-up party – and that needs to happen at the get-go. Not once Series B is burning a hole in the Advisory Board’s pockets.

My interest as a brand strategist has always been in creating the right conditions for growth. I’d maintain that focusing on revenue and how to drive it is never a bad place to start.

Revenue is the result of a value exchange. An exchange that begins with a perceived value proposition that has genuine meaning, drives desire, sales and ultimately growth for a brand.

How a brand plans to engage within the digital new world order, and identifying the most relevant marketing platform(s) from which to engage, share, sell and grow is vital to the lifeblood and evolution of any newborn business.

While most companies (start-up or otherwise) are awash with data, not all data is equal or indeed pertinent. ‘Useful & Useable’ performance analytics are critical to informing actions and behaviors.

Let me end on this. Whilst not an exhaustive list of things to consider, not knowing who you are as a business will surely translate into customer confusion and at best ambiguity. With the stakes so high, and the starting odds at “90% against”, it’s surely key to ask and address the right questions at the very start of your ‘start-up journey’.

Craig Wills is the co-founder of brand growth agency ORCA

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