5 MINUTE READ
Despite being exciting and endlessly stimulating, setting up a business and trying to meet milestones can certainly be overwhelming. For this reason, not everyone is cut out to be an entrepreneur.
With more than 2,000 startups rated to date, Early Metrics has collected a wealth of information on the red and green flags to watch out for to predict a startup’s success.
The rating agency specialises in the assessment of the growth potential of innovative startups and SMEs. Based in London, Paris, Berlin and Tel Aviv, it works on behalf of investors and blue-chip corporates (such as Visa, LVMH, Barclays and more) looking to invest or partner with new players.
Antoine Baschiera is CEO and co-founder at Early Metrics. We spoke to him for insights and tips to help entrepreneurs lead their startup to success.
What are the common characteristics of successful startup founders?
In the early stages of a startup’s life, the quality of the management team is crucial to secure the company’s future, much more so than the quality of the product or market positioning. Our rating methodology assesses several qualitative aspects and one of the most important qualities is the entrepreneur’s ability to build a team with complementary skill sets. An entrepreneur needs to be able to recognise their strengths and weaknesses to then find talent that fills in the gaps. A founder’s persuasion skills are also crucial to attract the best talent as well as convince investors and important stakeholders. This is can indeed lead to the creation of a strong business network which the startup can leverage to grow. Lastly, we have observed that founders who have a strong international ambition from the get-go manage to grow much faster in terms of team size, revenue and funding than those who focus on succeeding locally.
What are the red flags that suggest a startup will fail to hit its growth targets?
There are a multitude of ways things that can go wrong in a young startup. One important red flag is the lack of commitment of the founders to the project, both in terms of time spent and money invested. Indeed, some entrepreneurs are not ready to leave their stable jobs and take the leap, so they run their startup as a side project, which inevitably hinders its growth potential. Moreover, the cap table is a good indicator of the financial incentive that ties the entrepreneur to the company and if that incentive is low, the founder is more likely to quit the project. If an entrepreneur also has a poor market expertise and a small network, they might underestimate the competition and struggle to get traction. Lastly, depending on the saturation of a market, a startup might face big problems if it fails to put in place barriers to entry through innovation.
What can founders do to make the initial stages of the startup process feel more manageable?
Startup founders need to keep in mind they can’t do it alone. Reach out to business mentors, involve advisors early on or even talking to other entrepreneurs. It can really relieve some of the stress that comes with running a business and help founders overcome hurdles by using the knowledge from people of who have already been through the same situations.
How can founders get the most out of every early-stage customer interaction?
Having a structured testing and feedback approach is crucial to optimise the outcome of early customer interactions. Being able to take this feedback on board and pivot quickly is also very important to retain the loyalty of early customers. That is why startups need to have a strategy in place before they reach out to external stakeholders so that they respond promptly and build long term relationships with their prospects.
How can founders instil an ethos of constant testing and refinement from the get-go?
As mentioned previously, it’s worth spending time early on building a process to analyse and act upon feedback. At Early Metrics, we created a backtesting process to be able to track the annual progress of the startups we rate which then allows us to refine and improve our rating methodology. Products should also be extensively tested internally. It might sound obvious, but if your team doesn’t use and like the product it’s producing then you are in trouble. It is also important to leverage the creativity of team members by encouraging them to submit new ideas. However, founders should make sure new features or changes are in line with their vision and aren’t taking their attention away from the company’s milestones.
Could you outline the roles that market positioning and commercial trends play in startup success?
The specificities of the sector a startup operates in can really affect its growth potential. For instance, a payment startup will have to face a very competitive market in the UK so it will have to offer a very innovative value proposition and/or have a team with a solid business network. On the other hand, for startups operating in cutting-edge technology sectors, the difficult lies more in finding talent with specific expertise and customers who have the infrastructure or resources to adopt very novel products. Moreover, certain markets are very saturated, so they have poor growth perspectives, and some are highly regulated which can favour big players over smaller ones. Entrepreneurs should have a very clear idea of their positioning and constantly keep an ear to the ground because investors and stakeholders will certainly do so.
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