What is your start-up building?

by  Raj Shankar @ichibanraj

Start-ups typically end up building two things. No, I am not referring to products and services! I am talking about value and revenue. Now that may seem too ironical to you, but observe more closely and you will notice the difference.

There are start-ups that focus on building revenue right from the beginning. These are typically driven by entrepreneurs who have bootstrapped or come from a small business background. They are very revenue focused right from the beginning. The entire focus of enterprises that they build is around – what makes revenue?

Another group of entrepreneurs focus on value creation. This is typically the ones who work hard to create intellectual property or a community or a group of followers. They focus on gaining value and following and then eventually work hard to raise money to commercialize the value created. These are the kind of businesses that venture capitalists also seem to like. But this is also the group that has the greatest failure rate!

The question then is to find out what your start-up is trying to build. Based on the intent you need to focus on the right metric. Based on the intent and objective you (the entrepreneur) needs to ask one of the following:

  • If it is value creation, are you constantly assessing the value of your start-up?
  • If it is revenue generation, are you constantly tracking the growth of revenue?

Not asking the right question and creating the right measures could make your start-up lose focus too soon. This is what seems to be happening with most start-ups and their founders these days.

Be honest with yourself and be clear on what you are trying to build. Once you decide, stick to it. This focus helps not only you but also the people who work for you and the other stakeholders who are viewing your start-up (investors, bankers, angels, partners, strategic investors, etc).

More articles by  Raj Shankar

 

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