From a few hundred thousand ‘pony’ to a billion-dollar startup – famously known as a unicorn. In the early 2010s, this mythical status was only attributed to the likes of Facebook and Google. However, if there is one thing that the 2010s have taught new developers is that this once rare feat – unicorn status – is achievable. Today, there is a staggering rise of unicorn startups such as Uber and Airbnb, among other 200+ startups, as reported by CB Insights. So, what’s the secret to building a startup unicorn? Is there a magic blueprint that guarantees success? These are questions in every startup developer’s mind. We’ve come up with a simple guide for startup developers who want to join the exclusive unicorn club. These are 5 key steps that differentiate the achievers from the dreamers;
Selecting the Ideal Industry to Venture In
Most of the current unicorns are in the software and online sectors. Other notable sectors include electronic commerce and fintech. The current trend shows that the IT industry is one of the sectors with actively developing niches- hence the highest number of unicorns. Irrespective of the sector, all unicorns have one thing in common- they are disruptive. These are factors you should consider when trying to identify a niche in the market segment that is sure to cause ripples through the industry;
Your Area of Expertise
You should turn your passion into a portfolio and have a team of professionals. Identifying a market gap in an industry-aligned to your passion increases your chances of success multiple folds over. It not only ensures that you run the company passionately but also helps you to stick it out during the tough times.
Forecasted Industry Growth
This involves studying the market and identifying both threats and opportunities. This might call for the need for market-leading software solutions that provide business intelligence on your target market. You don’t want to venture into an industry whose market is future is at risk. For instance, the likelihood of attaining unicorn status in the oil sectors – whose stock is on free fall – is close to none.
Most people will advise you to avoid an overcrowded sector. However, it is worth noting that a reasonable competition should not be an entry barrier for you. Furthermore, it shows your product is acceptable in the market and that consumers are already willing to spend their money on it. For instance, Uber has largely dominated the ride-hailing industry, but that did not stop Lyft from venturing into the market. The latter got a sizeable chunk of the market and is now worth over $24 billion.
Remember, the market responds positively to a new and strategically positioned entrant.
Creating a Unique Product
You’ve probably heard multibillion-dollar owners say this; Having a bright idea in any market segment is one thing – probably the easiest – but coming up with a product that will have a high affinity towards a wide market segment, now that’s the goldmine. According to CB Insights, 42% of startups collapse due to the failure of identifying a market need.
Having a unique product requires possessing a unique pattern or formula different from the already tried in the market.
Some characteristics of great products/services are;
- Create a product that you will be willing to spend your money on. For example, New Relic’s platform was created by engineers to be utilized by fellow engineers. Not a bad idea, right?
- Ability to solve familiar challenges, allowing it to fit into the market effortlessly.
- One that brings excitement to the market and that elicits consumer spending with minimum marketing.
- The product’s concept should offer a better way of satisfying the masses’ needs. It should either bring out a new behavior or supersede an existing one.
Uniqueness can also be brought about by improving an already existing product. Differentiation of the product gives it a competitive edge from the rest of the products offered in the targeted
It is quite evident that many successful startups work on getting revenue first and later go for profits. So how do they access the required working capital? A startup should have the ability to bootstrap for the initial stages, as this brings more stability and readiness before outsourcing funds. For instance, Girish Kumar Navani, the CEO of eClinicalWorks, bootstrapped his firm for two years while doing his full-time job. This allowed him to validate his concept and familiarize the startup with the consumer base. The perseverance led him to generate a revenue of $ 300 million. Besides, don’t spend the infancy months of your startup chasing investors while all you have is an idea. Remember, ideas are valueless until you bring out a product. Show traction, and investors will not think twice about funding you.
Adi Tatarko, CEO of Houzz, a home design startup, advises, “Go to investors with a real product with traction, instead of a deck. If you spend the first six months to a year building a great product or service rather than chasing investors and redoing PowerPoints, you’ll be surprised how the dynamic with investors will change.” Investors are rarely intrigued by the idea but with the team that steers the ship and the end product. They are also attracted by the forecasted growth and revenue, which is backed by hard data.
The size and scale of your startup should be defined and planned for growth in its initial stage. While developing a unicorn, behave like you are running one from the word go- working as if success is guaranteed. To attain growth, you must:
- Communicate your goals and vision to the investors so that you don’t prioritize maximizing profits only. It is always a paradox when deciding between prioritizing profits or growth. “Remember, maximizing profits is not directly proportional to maximizing growth,” claims Pandey, CEO of Nutanix.
- Establish standard operating procedures that promote startup growth
Allen Brouwer, the co-founder of Best Self Co., explains that you should build your business as if you were building a $100 million company, not as if you were building a one-person startup. Once you start gaining momentum, you’ll wish you had the systems, processes, and hiring practices of the big companies and not the piecemeal processes of a startup.
Having such a mentality and spreading it to the whole team maintains the attraction towards the concept. Even better, creating a strong foundation will always be a reference point for the team whenever faced with challenges.
- Strive to reach greater masses while iterating positive outcomes and means of operating.
Focusing on consumer experience can lead to further growth. The business should be able to acquire more clients while not forgetting the loyal consumers. The building of a client relationship must be from bottom-up through proper customer services.
The loyal customer base will promote growth through marketing in reviews generated by the users and social media. This lowers the marketing cost.
- The startup should orchestrate the next move of developing a different but needed product in the market. This can be referred to as making unicorn babies.
This is achievable through learning from past mistakes and continuous study of the market.
2.Creating a competent workforce
HR is another important factor when acquiring investors. Therefore, get a team with a good track record. The team should also have the ability to go through the inevitable challenges, bring in new ideas, and remain united for the common goal. Julia Hartz, the co-founder of Eventbrite – a service for event organizers, suggests that your next step after gaining some steady traction should be investing in an all-star team. Besides, ensure to develop a just culture where the team can report errors without the fear of victimization. This kind of working atmosphere will breed and ooze brilliance.
The ultimate goal of a startup is to join the league of the elites. However, this will require you to not only build the right product that makes life easier and get top investors to back it but also seek a great team. Also, ensure you have people you can bounce ideas off. This is why startup incubators and accelerators increase the chances of a startup to succeed by almost 60%. While this guide is not the elusive blueprint that guarantees the transformation from startup to unicorn, these steps should help you plan better and increase your chances of success.