The era of the unicorn has ended. This means startups are quietly shifting from a purely growth-oriented approach to doing business, toward profitability and sustainability from day one. This has been prompted by the fact that venture capital funding has dried up in regional startup hubs like India, as well as in Southeast Asia.
It’s not that investors no longer want to put their money into great ideas, but they are rationalizing their portfolios and trying to avoid getting burned by great ideas that don’t generate profits.
Thus, startups and small businesses are looking for profitability first, as well as sustainability.
For the startup ecosystem, these businesses are considered zebras, rather than unicorns. These kinds of businesses are both black and white, providing both innovative services and making a profit. Unlike purely growth-driven startups, which simply innovate, these zebras present a sustainable business model.
For an aspiring founder or a startup that intends to pivot to sustainability, however, the question is how to find a product or business model that is profitable from day one and innovative enough to warrant growth and traction?
To answer this question, here are three things that businesses should consider:
1) Data should drive the search for sustainability
Business intelligence has long been considered one of the best tools for empowering businesses to make better decisions. This is why enterprise-oriented platforms like ERPs, CRMs and the like, are a desirable addition to any company’s BI efforts. So are business dashboards that offer a quick overview of just about any trend that can be relevant to a business.
According to Ben Carpel, CEO of Cyfe, a business-dashboard platform, large enterprises have long enjoyed the benefit of full-scale ERPs. However, the need for business intelligence among small businesses is something that needs to be addressed. “Businesses spend upwards of 80% of their time collecting, monitoring and reporting data,” says Carpel. “We recognized that there was a need for an analytics and business intelligence dashboarding tool that was both affordable and easy to use.”
Such access to data will be important to a startup designing and testing its product, in the aim to convert its minimum-viable product into a minimum-buyable product. A business dashboard, for instance, can take data streams from multiple sources (yes, even data on competitors), enabling users to track trends and make better decisions.
In this regard, Carpel is no stranger to focusing on sustainability. His company has decided not to accept venture-capital funding, in order to focus on customer needs. “By not taking outside money, we know we are going to be a sustainable solution for our customers,” he shared in an interview on Forbes. “We can focus on what’s best for our customers, first and foremost, instead of worrying about potential conflicts or strategic disagreements between management and investors, and getting distracted by that.”
2) Excellent user experiences will keep customers coming back
Innovation and disruption are the bedrocks of a startup’s business model. There would be no Uber or Airbnb if people decided to simply stick with taxis and hotels. However, it’s not as if similar business ideas have not been tried before. In fact, the idea of ride-sharing was explored as early as the 1990s.
The problem is in execution. In the 1990s, the Internet lacked the mobility that we all now take for granted. Because Uber, Lyft, and other similar apps like Grab and Didi, provide an on-call private-car service with a few taps on a mobile device, these solutions are so pleasing to use that one would not think twice about booking a ride.
Ravi Mittal, founder and CEO of the dating app, QuackQuack.in, also agrees with the notion of profitability and growth without the need for external funding. In a post on Medium, he shares how improving user experience delights customers and increases retention rates. “Wherever possible, we try to make nifty changes so users don’t have to spend extra time typing or clicking at something which could have been avoided with better UI.”
He adds that product developers should not unnecessarily burden users with excessive spec requirements, and apps should not be power and memory hogs that will render a user’s device frozen and useless.
3) Engagement should be the purpose of sharing
With the deluge of content that is accessible across mobile channels, there is increased competition for views and engagement, while at the same time, attention spans of users are shortening. This means that metrics such as pageviews, likes, and retweets have now become more of vanity metrics than valid ones. That’s because raw numbers cannot always substitute for actual conversions with customers, profits and return customers.
The more important action and metric now would be engagement. Paul Boyce, founder and CEO of Popcorn Metrics, writes about the importance of user engagement in growth. “If users are getting value then they are going to stay around for longer. And if you can retain each user for longer, you will have more opportunity to generate revenue from each user (meaning a greater Lifetime Value, so you can afford a higher cost of Customer Acquisition) and more opportunity to have each user refer other new users – all of which leads to growth.”
In short, it is not sustainable for startups to just keep growing user numbers. Rather, to ensure long-term value and thus long-term profitability, startups should take care to keep existing users engaged.
The paradigm shift toward a more rational approach to growth and customer value is a welcome one, especially since it changes the focus from seeking outside funding. This way, startups and emerging businesses can emphasize what’s important: finding data and trends to support their strategies, building great user experiences and ensuring long-term customer value.
Oren Rofman is a senior technology writer. He’s particularly interested in information technology, big data and the cloud.
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