By Cristian Rennella
If we take Facebook, Google or Microsoft as a reference, we are definitely focused on market exceptions. The reality is that less than 1% of new startups receive external investment capital to start and then grow.
Opposite to what we commonly see in media, the best strategy that we can apply is to develop our startup with our own resources and by acknowledging the existing limitations.
I would like to share the lessons I have learned while our startup elMejorTrato.com was growing up and while we transformed it into a company with more than 20 employees, which took us more than five years of continuous work and dedication.
Here are the lessons.
1. The easiest way is to spend other people’s money
In some startups that receive external investment capital, I usually see a mistake: the habit of wasting the money of its investors.
What it is needed to understand as a starting point is that success is not attained when someone invests in our project. On the contrary, success is strengthened when we return their money plus profits to those who trusted in us.
Before spending our own resources — without external investment — we must think and evaluate 100 times the different alternatives. In a startup, we should test a large number of possibilities before finding the appropriate one that creates value.
In order to achieve this, rather than money we need time, patience, freedom and above all dedication. Success cannot be purchased.
We have just seen why it is better to start with our own savings; let’s see now how to do it. The best way to implement this strategy is by generating added value to our users; the 99% of the new ventures should follow this. We will delve into this point later in the article.
2. Liberty is the differential
Beyond this basic concept, something that few people value of an organic growth without outside investment is the freedom from external pressures that the investors would exercise – whether they are Angel investors or it is Risk Capital.
When we accept external investment for our development, from the beginning we must understand that we have limited time to show results. As flexible as that deadline may be, we definitely cannot take all the time we may need to develop the new concept.
For sure there are some entrepreneurs who prefer this pressure, but in my case I think that the best results come out not through pressure, but with dedication.
Pressure may help us to get ahead in the short-term. Instead, dedication enables us to design, and most importantly build new roads with long-term efficiency.
The amount of investment or money available with a startup is not what makes the difference. What makes the difference is the freedom to try and interact with clients every day; they are the ones that will teach us what they want and need.
Finally, in the past few years while going online, I have seen a large number of enterprises that began, and, while they were discovering a cost-effective method, had to give up because of external pressures from investors.
Under no circumstances am I saying that investors are bad for our project, but definitely not every startup needs or should consider seeking financing.
Only those ventures that require a large-scale investment to be profitable (as Twitter, which is not even yet profitable) should consider, in my opinion, this option.
3. One goal: create value
This point was mentioned earlier in this article, but now we will delve into it.
As we are undertaking our project with our own resources, we must understand that we do not have enough capital to generate new customers. That means, we will not be able to spend on marketing.
Then the only way to succeed is through generating outstanding added value for our customers.
The “word of mouth,” as it is known in the offline world, today represented in social networks like Facebook, Twitter, Pinterest or Instagram, is essential.
To stand out from competitors and to achieve organic growth, our service or product must effectively solve a real and specific problem to the end user. This is essential: “it must solve a customer problem.”
An example of this was Google and its search engine in its early days. These were developed as final thesis by some students at university. Those students later became its founders. At that time AltaVista (a search engine) was bought by Yahoo!, and its owners had all the investment capital required to make the search engine popular, and thus eliminate Google.
However, Google succeeded in generating added value in its search engine by offering outstanding results that no other competitor could match. That added value offered to the customer was the differential that led Google to the global power that it has today.
Although Google received external investment, its founders started from scratch with a thesis, and no resources. They only had their savings, which almost made the owners sell Google to Yahoo!.
Learning from this example, the best way to undertake a project is with our own resources. These days, for instance, an online site has practically zero cost for which money is not fundamental. The important thing is our ability, and above all our will to overcome challenges.
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This article is written exclusively for the RMN Digital site by Cristian Rennella (pictured above), co-creator with Hernán Amiune of oMelhorTrato.com — a real-time specialized service-product comparing website.
This article is published under the RMN Digital’s “Thought Leaders” series in which top tech market leaders of the world express their views on different burning issues and market trends.