Building a startup: Three questions every startup must answer to beat their behemoths

Editor’s note: This article originally appeared in TechCrunch

When speaking about the historical trajectory of significant movements, Ghandi once said, “First they ignore you, then they laugh at you, then they fight you, then you win.” 

For startup founders, these words aptly illustrate the road — and obstacles — that lie ahead. Startups that succeed are destined, at some point, to face off against the most powerful incumbents in the world. 

Still, there has never been a better time to be a startup than right now. More and more often, we’re seeing startups overcome seemingly insurmountable odds to redefine industries that had remained stagnant for decades. Three key factors are driving this shift in favor of emerging players: 

  • The cycle of creative destruction is shorter than ever before. Gone are the days of five-year plans, replaced by 12-18 month roadmaps that favor the agile. 

  • Customer loyalty has waned across the board. Even the most entrenched businesses and industries are willing to try something new.

  • Portability and the cloud have permanently altered user expectations. Vendor lock-in is no longer an option.

What separates the successes from the rest of the pack is understanding how to go up against and defeat big, established companies that seem to have at least one major advantage at every turn. The booming success of startups in recent years, particularly through the omnipresent uncertainty of the last two, has borne this out. We can look to lessons learned from the recent success of companies like Twilio, Snowflake and Zoom to ask the right questions and develop a competitive plan. 

Are you an improver or a disrupter?

There are two paths most startups follow, and the first step to success is to decide which one you’re on. The first road is traveled by improvers — those who see an opportunity to make an existing dynamic better. The second is traveled by disruptors, startups that believe the current way of doing things should fundamentally change. Behemoths have established playbooks for battling both, but knowing exactly who you are and what you’re about will allow you to stay on the offensive the right way. 

The immediate challenge for improvers is relevance in an established market. Not only do you have to be exponentially better than the competition, you have to find a way to prove it. For disruptors, it’s convincing prospects and the market at large that they’re doing things wrong without being confrontational. Beyond that, the obstacles to beating your behemoths become fairly similar. 

What to expect: At the outset, big vendors will simply ignore you. They will tell their customers that you provide an unnecessary service. 

Getting a foot in the door here is the first major obstacle. Your challenge will be to find someone within the organization willing to take a chance on what you have to offer and demonstrate an improvement the incumbents can’t ignore. 

Once you’re through that gate, entrenched competitors will shift gears. They’ll admit that your offering has value, but will claim to have the same thing. Or, they’ll say it’s coming soon. They’ll remind the customer how much broader a scope of services they can offer. Executives tend to be risk-averse as a group, and don’t like to switch horses midstream. There is comfort in familiarity, and many will be willing to wait until a vendor they already know can provide the same value. 

Finally, startups face commoditization. Big vendors will not only commoditize the technology, but offer free add-ons and deep discounts that a startup can’t afford. As an up-and-coming startup on the improvement path, it’s important to understand that these gates will exist before you even reach the road. Your methodology and approach will need to change accordingly at each gate. 

Opportunities to look out for: Today, the third gate — commoditization — is breaking down. The world is changing so fast that many behemoths can never quite catch up. The cycle of creative destruction is so short that incumbents can no longer safely play the long game, the game of erosion. The modern world is built for agility, and startup founders should embrace this emerging dynamic with both arms. 

The reality for most startups today is that customers depend on us to win against their own set of incumbents and disruptors. They depend on the startup ecosystem not only for bleeding edge tech, but for knowledge and insight about what’s ahead

What do you deliver better than anyone else in the market? 

Startups die of indigestion, not starvation. In the early days of any startup, the possibilities seem infinite and your competitors seem to offer everything. But your time and resources are limited, whereas your larger competitors are bound by no such constraints. There is so much a startup can decide to do that cutting away becomes the most critical early exercise for a founder. Remember that your job is not simply to build products, but to make money. Investors want to see a clear, thoughtful path to a good return. Boil your business down to the one or two key things customers are willing to pay for, and lean hard in that direction. 

What to expect: Once legacy vendors start taking you seriously, it’s critical to identify your competitive edge and build on it so that they can’t overtake you on price. It is your responsibility to know your customers’ needs better than the big players. Your advantage is that you can add value to your core technology and get it into the hands of customers far faster than the competition. You can respond to and integrate customer feedback on a timeline that will feel near immediate in comparison with a legacy vendor. 

Opportunities to look out for: Once you’ve landed in a market with high potential, figure out what’s next to expand the way you service that market. From a practical perspective, there’s nothing a startup can do that a bigger company can’t. Unless you have a magic secret recipe like Coca Cola, your larger competitors have pretty much all the resources they need to win long-term -- at least on paper. Returning to Ghandi’s quote, don’t wait until you’ve won to look ahead. Once they stop laughing at you and start to fight, your product is ready to both scale and evolve. 

Who do you need on your team to win?

Hiring is critical at this stage. You’ll want to bring in people specifically to help scale, and people to begin that second arc. Building differentiation on top of what you’ve already created is the only way to stay ahead of the incumbents, and simultaneously growing your flagship offering will help provide the runway needed to do this thoughtfully. Of course, scale can slow things down -- and that’s not something startups can afford. Successfully maintaining that delicate balance between your present and future is all about who you’ve got on your team. 

What to expect: While there are of course people who can drive both scale and innovation, most excel at one more than the other. Even in those cases when a leader is equally adept at either, you probably don’t want that person’s effort stretched so broadly. Evaluate the talent you already have, understand where their skills and interests lie, and give them opportunities that fit. From there, you’ll have a much clearer picture of who needs to be brought in from the outside. 

Opportunities to look out for: When building the team responsible for continued innovation, hire people who have a track record of bringing ideas into reality. Building a second product or service is as hard as building your first, and you have to do it without the benefit of anonymity. That means you are on the clock, and need people who execute as well as they ideate. 

When building for scale, look for people who allow you to maintain your greatest advantage over the behemoths -- pace. That means operational experts who think about growth as strategically as your engineers think about building products. To continue to move at a start-up pace even as you grow requires creative thinking, internal innovation and constant flexibility. It’s imperative to set the right culture from the beginning, so that this mindset is never up for debate, even as the company grows and evolves.  

For modern startups battling behemoths, the playing field has begun to level significantly. Working within universally shorter timeframes is where startups really have the opportunity to shine. Don’t worry if they ignore you to start, don’t lose heart when they laugh and don’t shy away from the fight. For the next wave of innovators, winning has never been more possible. 

<br>This article originally appeared in TechCrunch.