Startup vs Growth Business Model

I have always been a start-up guy at heart. At 23, when I didn’t know anything about business model, revenue stream, cost management and clients, I started a company, which of course failed miserably. Well that was certainly not my last tryst with entrepreneurship; a streak of three more failures followed. As if it was not enough, I spent seven of last ten years working for a startup, which only recently found its ground – courtesy a seasoned management team with deep pockets and resilience. You got the picture – a stubborn, passionate technology startup guy trying hard to make his place in the legendary world of entrepreneurship.

However, things changed a few months ago when I accepted an opportunity to do product management for a small software company recently acquired by a private equity firm. The company has a robust business model with 70% market share, healthy profits and thousands of clients.  The previous owner never invested in the business, so products lagged the technology curve, resulting in an unhappy client base and the threat to lose market dominance. The private equity owner, unlike its siblings, is a long-term investor that brings operational efficiency to a software business, instills growth and sells when the valuation is ripe. On an average, this firm holds a company for 7 years. The strategy is clear: Infuse growth by bringing innovation in products, fixing the business model [ license versus subscription], and getting the right organization structure. We are already seeing returns of this strategy in first five quarters.

The debate is which business model is superior – Start up or Growth? One can argue that we are not comparing apples to apples. Sure, but for a technology person who is not an innovator [hence little chance of coming up with next big idea] is it better to venture into an unchartered start-up space with a very high failure rate or turn around a proven but laggard technology business? The latter sounds simple but it has its own challenges –  finding the right opportunity and raising the capital are the obvious ones. However, it eliminates the risk of not finding the right business model – the genesis of many start-up failures.

I will learn more about the growth environment as this story unfolds in next few years. It is good to know that there are more ways to achieve glory!

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One response to this post.

  1. […] biggest risk with a startup is to not find a viable business model. Since most start-ups are genesis of an idea, they generally lack a sustainable business model at […]

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