Launching Your Company in Today’s World: A Startup DNA of Performant Resilience

Each startup journeys on a unique path and while there are commonalities between them, there is no one approach that should be prescribed. At our firm, we look to the founders to lead the way and our role as holding up road signs along their path when we think they could make for helpful guides. During such uncertain times (from COVID-19, to national unrest, and the looming presidential election) everyone, including ourselves, are in search for guideposts.

It’s become apparent that an entrepreneur launching a new startup in the post-pandemic context (2020/2021) will benefit by developing the company to be as native as possible to the new market reality and expectations held by both investors and customers. Like many of you, we have spent our time in conversations with founders, investors and corporates to inform our understanding of how the rules of startup natural selection have changed. The period defined by (venture fueled) topline growth as the indicator of success to trump all others is no longer the context today’s companies are being built within. Startups were encouraged to have the disruptive force of a flamethrower, today it is the titanium scalpel that will intelligently rises above rest.

In the following paragraphs, we are discussing the adapted lens we are using to be helpful coaches to our founders and through which we are assessing new investment opportunities. It is an evolving framework that’s best kept as a living conversation with our entrepreneurs, co-investors and network. The goal is to outline the DNA of a startup that will thrive natively to the new context, we believe that DNA is one of Performant Resilience. It is not an exhaustive list. Many attributes are just universal good business with renewed emphasis while others are more specific to the changing context. All are centered around new enterprise software startups, as that is our firm’s investment focus.

In what will be a three part series released weekly, this week we start with Building a Startup That Thrives in Today’s Climate, a deep dive into how founders can position themselves for success by clearly communicating their bold mission, conveying the adaptive resilience of their team, and articulating the necessity of their solution to customers.

Our three part series on Launching a Startup in Today’s Climate includes

• Part I: A Startup DNA of Performant Resilience (this article)
• Part II: Going to Market with your Startup in Today’s Climate
• Part III: Startup Financing in Today’s Climate

We hope it sparks some valuable conversations for you and we look forward to being a part of them.

Thank you to the friends, founders and investors for their contribution in shaping our thinking.

Building a Startup That Thrives in Today’s Climate

In today’s business environment of extreme uncertainty, new founders must be able to clearly communicate their venture’s mission, team value, and ROI in order to stand apart from competition and overcome potential risk aversion from customers.

Topics Discussed in This Post:

Mission: Develop a bold, long-term vision that rises above providing short-term, post-pandemic solutions. Communicate that value-proposition by framing your product as a must-have solution (or medicine) that addresses a priority pain point for future customers.

Team: When communicating why your team is the best equipped to execute on your mission, make it a priority to demonstrate market awareness, agility, and grit. Honestly address potential challenges and speak to how you have overcome past challenges.

Product: Given uncertainty around enterprise budgets and customer purchasing power, instill confidence in your product by zeroing in on key performance or efficiency KPIs that drive short-term value and require little risk. Consider ways to creatively and effectively communicate ROI through the use of dashboards or other tangible customer success statistics.

MISSION

A BOLD long-term vision that transcends the market rush to post-pandemic trends and rather is anchored in longer standing structural shifts

Success lies in you being non-consensus and right. Resist joining the noisy crowd of startups positioning themselves as the successors of 2020’s spike in consumer and enterprise online adoption. While your new company may benefit from accelerating tailwinds you will stand above the noise via your unique and bold long-term vision. Speak to bigger structural shifts and the convergence of exponential curves that have been occurring on a longer time frame than just what is happening now in the first half of 2020. While it may result in fewer VC meetings, those who do take them will likely be better targets.

Our Guidepost: A ‘Why now’ slide in your pitch with your earned insight on the converging structural shifts that make it ripe for your company to come into existence (i.e. Uber was iPhone & GPS). The post-pandemic reality can be an item you zoom in on as a more recent accelerant yet shouldn’t anchor your macro case. Mike Maples’ concept of backcasting is a good starting point.

TEAM

Founders demonstrate adaptive awareness to the new market context and battle-ready conviction

From the capital market to enterprise budgets the context in which you’re building your startup has changed. Founders will benefit from demonstrating three traits in tandem: (1) a receptiveness to the signals the market is sending them, (2) the flexibility to efficiently better position their teams and business, (3) a convincing conviction to build a startup in a downturn when the odds are against them. In a storm you want to be the well rooted yet bending branch.

Our Guidepost: Humility and empathy are important during such a time. Outline what is known and be honest with what is not, then develop a path forward that can be both clearly communicated and regularly reviewed. To add validation, give examples of how you’ve executed successfully in past challenging scenarios and clearly articulate why you want this to be your life’s work. Balance your level of receptiveness with a healthy dose of founder grit. Once you have a clear path and it’s time to execute, your grit will rally your team and inspires confidence from your early adopters and investors.

PRODUCT

Solution that demonstrates tangible near term impact to an enterprise’s bottom line

Enterprise budgets for innovation with big yet uncertain or long-term payoffs have evaporated. Enterprise customers are focused on solutions that drive out costs in their business and improve their bottom line without introducing risk or significant effort. As the customer’s horizon has shrunken to focus on short-term gains so has contracted the window within which a new product must prove its value. It may sound like an unfair request, but the pendulum has swung back in favor of the buyer who are also feeling the pressure.

Our Guidepost: Narrow focus to one performance or efficiency KPI valued by your customer that you can demonstrate tangible ROI for with a short time to value of no longer than a quarter. Have crystal clear consensus with your customer on what amounts to a meaningful ROI metric, how it will be quantified and within what time frame. Re-purpose your resources so that everyone is marching to achieve that ROI number. For data intelligence startups, this is when demos on a customer’s historical data can prove highly effective to showcase impact.

Avoids introducing unvalidated new workflows

Become a valued contributor to the legacy ecosystem rather than a usurper from day one. Increase the chance of early sign-off and validate the ROI of your product within existing enterprise workflows. During recession hit periods, executives shift their focus from innovating to reducing risk and there is little appetite to invest time and resources in unproven tools. Reduce the risk profile of your product by first making it as a lightweight addition to existing platforms and workflows, expand and supplement from there.

Our Guidepost: Strip down feature sets to just the core impactful elements and look for integrations into existing workflow platforms that are becoming increasingly 3rd party friendly. Have a clear expansion strategy from there.

See our two follow-on articles: Making Your Go-to-Market Native to Today’s Climate and Startup Financing in Today’s Climate

This article was written by Daniel Darling and Pascal Unger, Managing Partners at the San Francisco based Seed firm Darling Ventures.

Darling Ventures is your partner from day one. We write your first pre-seed / seed check investing out of our third fund and are happy to lead or join your initial round of financing. We focus our investing on software startups using DATA INTELLIGENCE, AUTOMATION and/or DECENTRALIZATION to transform the enterprise, industrial sector or traditional markets such as healthcare and finance.

We’d love to hear your thoughts: Daniel Darling & Pascal Unger