Opinion Piece – Key Indicators to Gauge a Startup’s Potential Success
Akhil Paul is a 3rd generation member of Caparo, a global family-owned conglomerate involved in manufacturing, banking & hotels. Besides working with his family, Akhil is an active angel investor & believes in the technological disruption of traditional industry. By utilising the strong networks he has established, Akhil likes to support entrepreneurs with smart capital and make weighty introductions to expedite company growth. Having encountered many founders over the past decade – Akhil is keen to share some traits that he has found to be indicative of company success.
Barring the typical factors that are inherently connected with the success of a startup (market size, product differentiation, management team & user metrics), here are some of the traits I have found to be linked with the most successful teams I have invested with:
1. Ability to “pivot” - If an idea/product isn’t gaining traction, they aren’t afraid to alter it. The same also applies to migrating from a product focus to a distribution focus if/when the need arises.
2. Embrace competition – They embrace competition gracefully- sharing best practices for personal and business growth. Consolidation in any industry is a likely eventual outcome and being ahead of the curve and engaging with similar businesses provides an edge.
3. Understand the Customer – They spend significant time with their customers (and at their offices) to see how their proposition/product makes their target customer more efficient and cost effective.
4. Understanding the Investor – They are cognizant of other portfolio companies (of the VCs) and contact bases (of the angels) who have invested. There are likely to be several potential customers, suppliers or investors in these networks. In this regard they choose their investors carefully.
5. Understanding the Cost Base – They have a robust understanding of their cost base & thus tend to be better prepared for downturns. This may involve ensuring rent is negotiated regularly, cash is managed/invested smartly, professional fees are monitored, location/cost of staff is considered. The MENA region represents a hotbed of talent that can serve a global market more economically.
6. Effective Recruitment – They spend time hiring the best people and don’t attempt to grow too quickly (hiring without proper reference checks and due diligence.) A major cause of startups failing early is the attempt to scale too quickly with the wrong people.
7. Understand the role of the CEO – They understand that the role of the CEO not only involves shaping broad strategy, recruitment & capital allocation but also (and perhaps most importantly), being the chief psychologist for the team.
8. Investor updates – They provide regular updates to both investors and customers, and by doing so provide themselves an opportunity to ask for advice from their investors. This is extremely valuable especially for recruitment, customer intros, investor intros etc.
9. Being vigilant – As they come across potential partners, customers or investors, they immediately attempt to arrange a warm introduction (perhaps via their investors). Ensuring the team are aware of who may or may not be the right people to speak to, can change the trajectory of a startup.
As reported by MAGNiTT, the MENA region’s startup ecosystem has experienced expeditious growth over the last 5 years -partly fuelled by an increase in angel investment. This has provided many startups with a longer runway to demonstrate their products and services, thereby increasing the likelihood of follow-on investment.
Recently, talented MENA-based individuals are channeling their intellect towards technological disruption across a broad range of asset classes. This has culminated in a significant improvement in the quality of the companies incubated & being funded over the last few years.
Historically, foreign companies keen to enter the region have faced challenges without forming strong local partnerships. The new wave of exciting MENA startups can facilitate potential routes of entry to the MENA market – a typically difficult market to enter. This has meant that there has been growing interest from Western companies seeking an easy way to tap MENA consumers – evidenced by Uber’s acquisition of Careem.
I remain excited by the MENA region; and believe that government support coupled with a strong angel community can help scale several local companies to significant size. I am a proud investor in MAGNiTT, a company I believe to be at the cornerstone of the MENA startup ecosystem, providing key insights into one of the most exciting early stage markets that exists today.