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3 Mistakes To Avoid In Early Stage Consumer-tech Startups

October 18, 2021
Company Building

Consumer tech businesses continue to represent a tremendous opportunity in Southeast Asia and India. For example, it is projected that ecommerce will grow at 80% year-on-year and double in 5 years to US$254B from US$132B in 2021. Shopee, Lazada, Tokopedia and Bukalapak are all multi-billion dollar valuation companies that are testament to the phenomenal growth opportunities available, and they are still growing. Vertical commerce players like Livspace, Pomelo, and Sociolla are hyper-serving the home goods, fashion, and personal care industries respectively, and raising millions of dollars in funding as a result. Their success is underpinned by the fact that — at a product category level — Southeast Asia is still in the early stages of online retail penetration.

But just the opportunity alone, does not guarantee success.

Having invested in over 20 early stage consumer technology businesses we have been on this journey many times & we know where the dangers lurk. In this article we highlight just 3 of the big mistakes we see founders making as they rush into growth during those exciting first few months.

Growing without sufficient Product Market Fit

Typically in early months, Founders are on a ‘Truth seeking exercise’. You have to be disciplined in determining whether the addressable market really needs you. If your product is not a feasible, economical solution to a real consumer problem then you must go back to the drawing board.

Are you able to retain & upsell customers? More often than not, Founders are dazzled by growth. An ability to attract lots of new users is fantastic but it could simply mean that you have created an incrementally better product. A product that is slightly better than what is currently on offer & therefore people feel it is worth trialling. You have to look at the true product market fit & that means interrogating your ‘stickiness’.

If you, as an early stage tech founder, are not retaining users, your flank is left open. There is plenty of room left for newcomers to out-execute you or indeed legacy players to up their game & leverage their scale. You might have invested in creating a category, but you can’t assume you now own it.

Focussing on incorrect metrics

As a high growth tech business there is a long list of metrics that are important to track. Each offers valuable insight but it is easy to get lost in the weeds.

It is important to isolate a handful of metrics that you always look to in order to take the pulse of your business. They are your North Stars. They will help you structure teams, define your culture & shape your business strategy.

However, with fundraising in mind, too often founders obsess about the topline numbers that they can present to investors in a pitch meeting. These metrics are often impacted by multiple variables meaning that, when things go wrong, they can’t accurately diagnose the problem quick enough.

Therefore it is crucial to do a bottom up breakdown of how you are achieving your topline numbers. Understanding the drivers of growth in detail allows you to identify where the bottlenecks are & how you can address them.

Not building a playbook for scale

In the earliest stages of building a business you & your founding team can be everywhere & across everything. You are spending lots of time with each other & with customers, be it face to face or virtually. You have a deep understanding of the product, a clear vision for its evolution, a detailed knowledge of the unit economics & a plan for winning new markets.

But is it on paper, or is it in your head?

You need to build a playbook for scale. Along with the rest of the founding team you need to map out a replicable growth strategy. A blueprint for how new joiners should tackle each task in order to maintain business momentum. Without this playbook in place people either focus on what they are good at or constantly ask for approval from leadership which adds slowness to the execution plan.

We recommend that you build your playbook by focusing on a single micro-market. A country, a city, a particular product line or even a single audience. This micro-market should not only be one you have successfully delivered in but also one that represents future markets you want to go after. Capture your learnings to demonstrate how teams can & must optimise the conversion rates, unit economics, CAC & spending when they are tasked with entering a new market. Remember, playbooks not only encourage frictionless business, they also give confidence to your investors.

If you have confidence in your product market fit, a firm grasp on your key metrics & a great playbook for scale we believe you are well placed to go further faster. To build an exciting, category defining business that will stand the test of time.

Best of luck!

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