StartUp Dilemma – 1 (Core Mission vs. Revenue Gen)

14 Mar

startup cartoon

I got this idea from Wendy who has a really funny blog, and from Bucket List publications . These guys basically have serial posts – so its one idea, and then you write on multiple ramifications of it. (I’m still struggling with remnants of writer’s block – so looking for ways to circumvent it!)

Add to this the fact that in the past 2 days I spoke to a bunch of start-ups at various stages of their life cycle, and brainstormed with them on various issues.

So, that’s my inspiration – I am going to do a series of typical problems that startups face…not necessarily one after the other all the time, but certainly whenever the urge strikes me!

The first one came to me when my friend – lets call him John Smith or Ram Shyam if you prefer an Indian name ๐Ÿ™‚ – (who is developing generic but customizable mobile apps for business processes on the cloud targetted at the various domains) swung by and disclosed his angst over a very standard start-up question.

Background: JS/ RS and his associates used to work at a large networking firm. They quit to follow their dream – some 6 or so months ago. They’ve been burning the proverbial midnight oil getting their app platform up. They even have a cple early customers on it – paying customers hallelujah! They are now busy figuring out the top verticals they should sell to – its a small team, and they obviously want to focus their efforts.

Problem: Their ex boss called them and said – can you build a “box” for me directed at say x vertical – it’s a vertical the team wants to target, but the boss’ request is not quite front and center of what they have set out to build. If it works, and is successful, they may get immense scale. However, he is unwilling to give these guys any guarantees…

Dilemma: Working on the boss’ request will take roughly 6 months of effort. Only some 30% of this is code they can reuse for their own platform – what they really want to do. However, it will give them an entry into the vertical of their choice. Also, saying no is tough. Not only does this effort give them some cash flow, in true start up style, they want their ex employer as one of their biggest clients (or partner – at early stage obviously they are open to all commercial angles); and they don’t want to close that door!

Sounds familiar? What would your advice to them be?

Well, what I said to them was:

a) Ofcourse it depends on the relationship between these guys and their boss, and their judgement of how true to his words he is
b) The positives are –
i. they get entry into vertical of choice – with many outlets. Boss has indicated readiness to partner – but is not guaranteeing (ie its not on paper) that they will get co-branding rights. (Which may also be OK for my trio – they should be, and are, open to white labeling)

ii. They keep the boss happy

iii. It does give them ready cash

c) The negatives are –
i. They lose 70% of 6 months of work – after all, if they wanted to build stuff for their old company, they wouldn’t have left it!
ii. More importantly, they have just started outreach to the market – if they do get interested clients biting at the other work they are doing, they will be hard pressed to service that (unless they hire ofcourse ๐Ÿ™‚ – good problem to have, huh?)

So, knowing that in early stages its very very difficult to say no to client/ revenue; i asked them to ask either for the branding such that they can leverage the access/ relationships with end clients in their future work – when they really need it; or ask for guarantee that they will get future business from their old company; or ask for enough money to make the 70% of 6 months worth their while…when I say ask – i mean either in writing or in terms of conviction in old man’s word…

I remember in EmPower – in our early days when we were sniffing all around for revenue – we would not say no to anything! We started with one division, and pretty much by chance, developed the other 2 – basically because potential clients came up to us and said – “can u do this?”. This evolution kind of walked alongside with our thinking on what the company should be – so all divisions stayed within the guard rails…conversely, when we were some 5 years old, there was immense pressure from the sales team to chase Primary Research dollars – it was an adjacency, the clients were common (Social Media research got bought by consumer insights people), it was a labor intensive service, technology made it outsourcable – but we said a steadfast NO – there were keenly fought debates, but boy, am I glad we did say no!

I don’t know what JS/ RS finally did, but I have a strong feeling, like a lot of us, he WILL go ahead and build the box for his boss – and take the risk ๐Ÿ™‚ what d’u think?

Parallels to share?

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2 Responses to “StartUp Dilemma – 1 (Core Mission vs. Revenue Gen)”

  1. Deepak March 23, 2013 at 2:04 pm #

    Build the box with a premium pricing (at least 40% of 70%)….

    • joshsang March 25, 2013 at 8:52 am #

      yep thats what i advised him to do as one of the options – as u know well however, premium pricing is hard to come by ๐Ÿ™‚

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