Growth versus Sustainability- Addressing a Startups’ Dilemma!
Are you a start-up founder?
Have you had sleepless nights trying to figure out sustainable scaling?
If yes, you are looking at the correct blog. Read on and I am sure we can help!!
There was once an Era when 10% to 15% annualised growth was considered unsustainable and veterans believed that a company grows at the GDP growth rate in the long run.
But today, take a moment to think about it!! India, one of the fastest growing economy has been witnessing a GDP growth rate of ~6% to 7%. Would you want to grow at that level? I am not sure!!
As a top performing start up or aiming to be one of the unicorns, you are under constant pressure from your peers to grow 200% + YoY. As a result, you operate in a cut throat competitive environment and end up with a negative bottom line, burning cash endlessly, dreaming of becoming a monopoly when the market consolidates.
But, do you ever become that monopoly?
To answer the question further, I will give you 2 good reasons why sustainability over growth will make you operate longer and ultimately make you achieve your long term goal.
1. Today’s consumer is very price centric- Eliminating Monopoly!
Eliminating necessities and luxuries, a consumer will always take the cheapest option available. What was once known for the airline industry- cut throat competition, is now applicable to all possible industries.
For example: Today I want to buy a pair of airpods online. I check 5 different websites and make a decision to buy them from Flipkart because that’s the cheapest available option. Unless and until there is something really wrong with the company, you will prefer the cheapest possible option.
Now lets say the online marketplace industry has consolidated. There are only 2 players and all other options have shut operations and a new entrant enters with a small differentiating factor.
There will for sure be a shift of the customer base to the new entrant and the existing monopoly will end.
2. How long will you be funded in a burn environment?- Uber A Disastrous IPO
Venture Capitals and Private Equity funds are mostly only interested in their exit strategy. They will be happy to do a Series A for you, maybe go to a Series B or even Series C. What happens post that if you are still burning money? How well do you think your IPO will launch?
Lets look at a classic example of a failed IPO- Uber
As all of us know Uber is still in their burn stage. Even though a high growth company with the potential to be one of the big four giants, it went for a disastrous IPO.
What’s happening today is that most people have started to believe that to be a giant you need to burn enormous cash. This thesis is based on Webvan and eToys.com of the dot com bubble, companies that burned a lot of cash and ultimately shut operations and not on that of Microsoft and Facebook, the major successes of the dot com bubble.
We at Jcurve are here to help you grow and scale efficiently. We want to be a part of your startup’s journey to success, help you brainstorm perfect strategies for your business.
Join our incubator program today.