‘Me Too’ Startups

A Me Too startup is one which copies the business model of an existing player. This happens in every Industry, especially once a player from that space becomes prominent. In India, I have witnessed a number of such cases. Grofers became popular, a number of hyperlocal commerce players came in. Oyo Rooms became popular, a number of me too startups entered this space. Most me too startups enter with 2 goals in mind; either they can create their own little space in the Industry or they can get bought out by the bigger players.

So can these startups succeed? Yes, they can if the market us big enough to accommodate them. Entering the market (generally in an upcoming location) and scaling up fast is key here.

Despite this, I feel it is very difficult for most me too startups to survive. With the risk of the giants eating up your market share through better pricing and rewards, me too startups can survive only if you have financial and management resources to back you up.

Build a Prototype First

A good prototype is very important for a startup as it is the first offering by the startup which gets to interact with the target market. The most important deliverable we can get from this is good, authentic market feedback.

A good prototype should

: convey exactly what the startup intends to do. Never confuse the product by adding features which do adhere to the core business idea. We tend to add more features to the product so as to make it more acceptable by our TG. For example, if I am trying to create a website to sell premium teas, I should not add other beverages to increase acceptance by the market. The aim of the prototyping stage is purely to get a feedback for the core business idea. So build a prototype which does exactly that.

: be a minimal product which can be easily modified. Sorry for being repetitive but the aim of prototyping is purely to get market feedback and make necessary amendments before going full steam ahead.

Prototyping is really important and is a stage which a lot of us tend to ignore completely. We go with our gut and end building a final product without taking any market feedback. This leads to a waste in resources as once we enter the market and get feedback, making amendments to a more complicated product is a much more costly affair.

Be Cautious in a Downturn

The Indian funding scene (globally as well) is not so bright for young startups as of now. Though we are seeing a lot of investment right now, the difficulty in raising money for companies is growing by the day owing to the large number of people starting up as well as due to the high and at times unreasonable valuations we are seeing. Sustainability of business is a big question and investors are becoming increasingly conservative and cautious in investing their money.

At such times, it becomes imperative for entrepreneurs to follow a conservative approach and handle cash well. Some tips include:
- A lot of entrepreneurs plan from one funding round to the next one. Since getting money is dicy, entrepreneurs should manage their money judiciously and spend as and when required.
- Mass hiring is a strict no-no. This is what happened in the last 2-3 years and now most startups are downsizing.
- Sustainability is key. Try to build a sustainable business with a clear revenue model. We should not rely on funding to sustain the business.

The startups which survive the lean periods are the ones which will sustain.