Looking At Startups By The Rules Of Natural Selection

The good news is that a recent Kauffman Early-Stage Entrepreneurship (KESE) Index shows the highest level of new business activity recorded in the last two decades, and the cost of entry at an all-time low. The bad news is that it’s still a jungle fight for survival for entrepreneurs of all ages and demographics, with over 80 percent not having access to bank loans or venture capital.

In this context, it’s time for every business, not only startups, to take a fresh look at the basics of business success. Jamie Gerdsen, in his classic book of lessons on business change, creatively titled “Squirrels, Boats, and Thoroughbreds,” aims first at existing businesses, but I believe that most of his points, like his laws of the jungle, can be rewritten for startups, as follows:

1. If you want to eat… I don’t believe in greed, but we all need to make enough money to eat. This means building a revenue stream, and tuning your business model to produce margins in the 50 percent range or above. I support being socially and environmentally conscious, but you can’t help anyone else if you don’t eat.

2. If you want to survive… Survival means growth and scaling. Once you have a proven business model, you need to scale the business up quickly to stay ahead of competitors. These days, doubling your business volumes every year is the “norm” that investors and potential acquirers are looking for.

3. If you want to be feared… Every startup needs a sustainable competitive advantage. In the jungle, it might be the strongest jaws, but in startups it’s more likely the strongest intellectual property. With no competitive advantage, startups with new ideas gaining traction are never feared, and are usually eaten for lunch as sleeping giants wake up.

4. If you want to mate… In the business world, we call this finding the right strategic alliances. That means you have to stand out above the crowd, and aggressively pursue those candidates that can help you breed even more presence and power in the marketplace. Sitting quietly on the sidelines, waiting to be found, is a lonely world.

Every startup in the business jungle begins with a limited amount of three precious commodities – time, talent, and treasures. The smart ones have a plan for how they intend to spend these resources, and measure themselves against the plan. Otherwise they will likely look back later, and find that one or more of the laws of the jungle have been compromised:

• Time – Start with a timeline of how much runway you have, with objectives and milestones mapped against the timeline. Time management is an art. Don’t waste precious time on the “crisis of the day,” in favor of strategically critical tasks. The best entrepreneurs work on making better time management a top objective.
• Talent – Every startup needs talents to give the company value. In the beginning, the entrepreneur has to cover all talents, which is made more possible these days by the wealth of information available on the Internet, as well as books and online courses. Talent can also be outsourced, but surviving in the business jungle without talent is unlikely.
• Treasure – Most entrepreneurs assume that treasure means funding. In reality, more important treasures often include intellectual property, the ability to innovate, and well-defined processes that can deliver great products and reach new customers more efficiently and effectively than competitors. Money is no substitute for these other treasures.

In summary, whether you are running a startup, a family business, or a famous brand like IBM, you are all part of the jungle. You can be a small tiger with big teeth, or an aging dinosaur. The laws of the jungle apply to all. It really is a world of survival for the fittest.

The jungle framework is a great one to set the right perspective. Startups which prosper and succeed learn the rules of the jungle early, don’t make excuses, and don’t look for any entitlements. Does your startup have an understanding of reality, a real sense of urgency, and the overwhelming drive to innovation to make you the king of the jungle any time soon?

Marty Zwilling