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By D. A. Rupprecht
Intrinsically, a startup is a group of people who organize themselves to deliver a new product or service, usually in an atmosphere of extreme uncertainty. Startups take on tremendous risks, for which the rewards can be equally great.
For those in the early days of this journey, success is anything but assured. The goal is to grow quickly and to attract the attention of the right people, especially those venture capitalists who can support business operations until the idea behind the startup becomes economically viable.
Startups are prone to failure. Any endeavor that takes substantial risks will most likely result in multiple unsuccessful attempts before it succeeds, and it’s often not the originator of the idea who invents the breakthrough product or service. If you want to be one of those startups that succeeds, you’ll need to work not just harder, but smarter.
Your Customer Base: Diffusion of Innovations
At its essence, startups seek to resolve a certain problem or set of problems, but unlike even a decade ago it’s impossible to just press the pause button to show how your new innovation will work. The business world doesn’t work like that.
To drive an idea forward, you’ve got to continue to aim at a moving target, getting certain people on board and excited about your innovation. It’s not just the product or service itself that matters, either. You need to get the right people not just to adopt it, but to get excited about it.
One of the oldest theories in social science, developed in 1962 by E. M. Rogers, relates to the adoption of new technologies and ideas. With the advent of new technology-based products and innovative technology-related services increasing at breakneck speed in the 21st century, this theory from over half a century ago still applies, perhaps even more so than it once did.
These are your customers, in a nutshell, as an approximate percentage of consumers:
Innovators (2.5%): These are the people who adopt innovations initially. They’re the ones willing to take risks, and tend to be younger and of a higher social class. They’re also more inclined to be financially aware, and are likely to interact with like-minded people keen to adopt cutting-edge technologies or new ideas. Amid this class of people, you’re likely to find venture capitalists and angel investors, people who are more willing to take a chance and put money into a project with a high risk for failure. Because of their financial resources, they’re also more able to rebound from failures.
Early Adopters (13.5%): This is the next group of people you want to attract. They tend also be younger and of higher social status, often with advanced educations and more open to new ideas. Unlike innovators, they tend to be more discreet in showing off their choices, but they’re also opinion leaders. Today, many influencers who embrace new products could be pegged as early adopters.
Early Majority (34%): This category of people who adopt any innovation do so over a period of time, and more slowly than the first two groups. Though they also tend to be of higher social status, they seldom throw their weight behind innovations until they’ve become more mainstream. Typically, they’re drawn to evidence that a new product or service is beneficial before embracing it. These are the people who’ll look at studies or research before deciding to use a product.
Late Majority (34%): These latecomers are more likely to be skeptical of innovations, only adopting products or services once a majority has done so. They tend to be of lower social status and less financially stable. They’re skeptical of change, and only adopt innovations once a majority has done so. They tend to base the adoption of new ideas and technologies more on how many others have already done so.
Laggards (16%): The last people to adopt innovative products or services are generally more adverse to change, often older and more focused on traditional ways of doing things. Typically, they’re in groups with lower social and economic status, who only really consider advice from family or close friends. As skeptics of change, they are the most difficult group to which to appeal. Strategies involving fear, using statistics, or pressure from other adopter groups will help draw in the laggards.
For any new product or service, you want to capture the attention of the first two groups especially, those who will help drive the adoption of your new ideas or technology to the rest of the market. Yet even those who enthusiastically adopt your product may surprise you in the new ways in which they adopt it.
Here are three examples:
1- Mac Minis were plugged as a more affordable PC than its Mac computer, but they quickly became utilized by users as home media centers.
2- Text messaging sought to inform mobile users about network issues, but it’s become a major form of instant communication.
3- Twitter was initially designed so people could just state what they were doing at the time, but it’s become a way people now share information quickly to a large audience, particularly through links.
Janakiram JSV – an advisor to a number of Bay Area startups – says this about how customers sometimes embrace innovations, “You are going to encounter an unknown set of customers who will use your products in the most unexpected ways and forms. You have to learn to adapt faster, and iterate quickly to stay relevant.”
Outsourcing: Startups Utilizing the Cloud
One way for startups to remain focused on their goals is to farm out those aspects of their business that aren’t part of their core functions. The cloud makes this especially possible. In fact, Wavestone US – an IT consulting company – has developed a “cheat sheet” on how to evaluate whether to outsource certain functions. It’s not so much cost savings that drive outsourcing these days, but services like payroll, human resources, accounting, and customer relations.
And digital transformation is occurring at a rapid rate. Many businesses are questioning whether they even need physical office space, as millions adapt to working from home. Technology has allowed teams to continue collaborating without major drops in productivity and, in some cases, productivity has even increased.
Towards the end of March 2020, Bretton Putter – CEO of CultureGene – surveyed 165 CEOs of mainly venture-backed startups. The study discovered that 76% of CEOs believed working remotely would actually improve productivity. Amongst this group, providing their at-home workers with treats or other perks, keeping team meetings to under 15 minutes, and pairing people with one another helped their staff stay productive. Conversely, the study found that longer meetings of over 15 minutes involving the whole team actually detracted from productivity.
Even if your startup isn’t primarily focused on technology, adapting tech for your core functions is imperative for any business these days. And startups are no different in how the coronavirus pandemic has affected them. Even simple things like using electronic signatures can help make things like signing contracts or hiring easier, allowing businesses to focus on fundamental operations.
COVID: The Elephant in the Room
As much as we’d all like to just get past this pandemic and back to business as usual, it’s not going to happen any time soon. It’s likely that travel restrictions, social distancing measures, and lockdowns are likely to continue in some form for the foreseeable future. Particularly in parts of the the United States.
Although you might think venture capitalists might be cautious at the moment, that’s not necessarily the case. Roelof Botha – a partner at Sequoia Capital in Menlo Park, California – stated that they’ve made fifteen investments since the beginning of March, even through California’s lockdown.
Meanwhile, managing director of Insight Partners in New York City Deven Parekh understands that there won’t be a great deal of liquidity for venture capitalists in 2020. This hasn’t halted their investing, however. They recently helped grocery delivery startup Imperfect Foods raise $72 million.
Sustainability has been something that has been increasingly talked about in venture capital circles, according to Kirsten Green, founding partner of Forerunner Ventures in San Francisco. As people have seen how shutdowns have helped wildlife and made for environments cleaner, she thinks consumers will think more closely about the environmental impact of what they buy, and where it’s made.
All in all, it seems that those in tune with investing in startups will continue doing what they’re doing, though mostly they see the rewards from their investment will have to wait. So perhaps this is a good time to invest – and maybe even start a business – with an eye towards the future.
Author Bio: D. A. Rupprecht is an internationally-based freelance writer who writes about technology, digital marketing, and finance. He also writes books.
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