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How startups can use small wins to scare big competitors

October 26, 2018

 

 The story of David and Goliath is perfect for the startup world. More accurately, it’s perfect for the competitive dynamics between early-stage companies vs larger corporations.

When these two vie for mindshare and marketshare in the same industry, startups need their proverbial slingshots to attack their bigger competitors and achieve success.

 

A clarification on success: In biblical times, David achieved success by actually slaying Goliath. While outrightly winning over the larger competitor could be the best outcome for startups, they can also win by growing so quickly that the larger corporation will want to acquire them.

 

Slingshots

When I was leading the business development team for a premier enterprise B2B company, I saw the David and Goliath scenario play out right in front of my eyes.

 

The enterprise 2.0 collaboration market (which came to be defined as using next-gen tools like wikis, blogs, comment boards, etc.) was small, as corporate users were struggling with use cases. Predictably, bigger players stayed out of it, concentrating on building and marketing larger but staid collaboration suites.

 

1. Validation by corporate buyers

All of a sudden the market grew and companies like ours began striking license deals with large corporations.

 

This was a classic slingshot: acceptance and validation of a fledgling product by some corporate buyers that are in the industries strategic to larger competitors.

 

These larger competitors were caught in a bind, as their large captive customers were looking to other providers for products/offerings, and their own product teams were a good 12 months behind in building next-gen collaboration capabilities.

 

So, they reached out to partner with us and to align go-to-market solutions. While the collapse of Lehman brothers and the accompanying downturn in the global economy prevented this from actually happening, it still serves to illustrate the point.

 

A couple of high-profile customer wins in a contested market can act as a slingshot that startups can use against Goliath-like competitors.

 

2. Key enabling technology

Another interesting example, albeit in a slightly different flavor, could be found in the crossfire of the Oracle-MySQL battle over a small Finnish company called Innobase (their product was called InnoDB).

By far, Innobase’s most important capability was that InnoDB’s technology was “ACID-compliant,” which is geek talk for a technology that can ensure that the data in database tables could maintain integrity and consistency.

 

Here, this technology was the slingshot. Whoever had it—whether Oracle or MySQL—could significantly deter or at least decelerate the growth of the competitor. Oracle fired the first shot by acquiring InnoDB, an event that received significant attention in the tech world despite the small price tag associated with the transaction.

 

3. Other slingshots

Slingshots can be of various kinds. I’ve talked about key customers and key enabling technology so far, but other kinds can include hiring technology superstars (and the IP and knowhow they have) essentially to perpetuate an acquihire.

 

Another could be to build a rival technology. This is not necessarily a direct competing technology, but a company can claim it is a viable alternative to a bigger competitors technology. This is essentially to create enough noise and distraction as to force an acquirer’s hand to execute M&A and remove “nuisance value.”

 

Note that I never recommend this strategy of acquiring skills/capabilities/positioning with the sole aim of getting acquired. However, this happens regularly in the startup world, and in many cases this does realize modest-to-good outcomes for startups.

 

But I’d say that the best strategy for early-stage companies would be to build value through people, technology, and marquee customers to crystallize “pure growth.” Then, let potential suitors regard these as slingshots to be neutralized.

 

Key takeaways

To founders and key stakeholders in a startup, here is my humble advice:

  • As you are growing your startup, always focus on “positive” growth: revenues, profitability, brand, IP, etc. However, do introspect and spend some time on building your slingshot, something that is seemingly small but is powerful enough to scare larger corporations.

  • This slingshot can be of multiple forms: industry luminaries that join your team, powerful technologies that form the critical path of large processes and activities, disproportionate media attention, and more.

  • Don’t try to be a nuisance, but aspire to be recognized and visible to a point where people in the know sit up and take notice.

Ready, aim, shoot!

 

Devang is a TIA Star Contributor and publishes high-value content that serves the Asian tech community.

First Published On: https://www.techinasia.com/talk/startups-use-small-wins?comments=true

 

 

 

 

 

 

 

 

 

First Published On: https://www.techinasia.com/talk/startups-use-small-wins?comments=true

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