His basic premise is that to do business with a startup, one has to overcome a lot of inertia, as a consumer and as a business. Startups often overcome the inertia with a bribe: an offer or cashback that makes it too good to be true or a zero-risk trial period. However, savvy customers are now asking, “Do I need this? Is it solving a pain point? Or is this a nice to have?”
“In other words, is this an Aspirin (pain killer) or a vitamin (nice to have)?” Sanjay says.
In many cases, startups fumble because the pain point isn’t as bad as founders imagine it to be. Establishing the product-market fit is about identifying whether “the customer will label the product an Aspirin”.
Hopefully, one can find it early and, if not, keep iterating until you identify that customer segment, get the product right, and ensure the right positioning of the product.
At that point, from a VC funding perspective, other unanswered questions come up. “Is this a large enough customer segment? Is the prize worth winning? Can you get to scale before an incumbent or a copycat outruns you?”
In other words, is the pain so strong that nobody will look for alternatives? Is the product differentiated enough, and why will only you win?
Seize the day
When Black Swan events like the coronavirus pandemic occur, entrepreneurs often panic. The first reaction is to slow down and wait for normalcy to return. While this is typically prudent, it may not always be the smartest move.
Sanjay says: “Black Swan events may bring 1,000x the rate of change than one might’ve anticipated, and often lead to permanent behavioural change. This could mean that a product that seemed like a vitamin before the event has become an Aspirin, and – better still – is likely to remain an Aspirin forever.”
A few examples in the recent past include demonetisation in India. This one event ensured that citizens became aware of digital payments. It was also an opportunity that Paytm and later the UPI ecosystem grabbed. India hasn’t looked back since.
While the cynical will point out that cash is back, the reality is that everyone – from milkmen and grocery vendors to household help and senior citizens – is now willing to accept payments digitally.
The impact of COVID-19
Coronavirus is an ever bigger event than demonetisation because it is global and has impacted every human being in the world. It has caused a change in behaviour that, in many cases, is likely to be permanent.
Suddenly, working from home doesn’t seem esoteric. Sanjay points out that many founders have been pleasantly surprised with the increase in productivity, the higher level of trust and creativity, and the more focused execution.
Asking visitors to wash their hands when you meet, do a namaste instead of a handshake, and ask for contactless delivery no longer seems rude or inappropriate. Older economy companies are realising the benefits of video conferencing, and not insisting on vendors visiting them. In fact, they are almost insisting that people not visit them.
There are dozens of other changes happening in all facets of life.
Sanjay asks, “If you’re an entrepreneur, what do you do? Do you simply wait it out? Do you watch your competitors morph from the sidelines? Or do you grab the bull by the horn and say ‘my time has come’?”
Step out of your comfort zone
Whatever you do, take time out to analyse if some dramatic non-linear change is happening, especially directly or in an adjacency to your business. This is especially important if it does one of two things: dramatically increase your market size, or intensely heighten your rate of adoption.
If a founder senses either of the opportunities, s/he needs to put a lean team together and quickly validate that this is indeed the case. And then figure out the fastest path to own that opportunity.
“My personal view is that if there is a compelling value proposition and an opportunity to permanently change customer behaviour, focus on it and not over-optimise the business model initially,” Sanjay says, adding that’s “a call dependent on your business”.
In all cases, however, founders may never get this golden opportunity to 1,000x their rate of growth by stepping out of their comfort zones.
Sanjay believes founders need to think hard, experiment quickly, and make magic happen.
“That’s the life and luxury of being an entrepreneur. Because if you aren’t, perhaps your competitor is and some other startup is being born. Disrupt yourself before someone else does,” he advises.
He says a few founders he spoke to said this was a truly unfortunate time for the world and would they be “seen as trying to take advantage of this situation”?
The answer Sanjay proffers is to the point. “The world will reject whatever isn’t addressing a pain point. Addressing a pain point is not just grabbing an opportunity; it’s fulfilling a responsibility.”
This may be an unusual and unfortunate time, and we need to “make it count”.