Can Startups Survive in this Recession
Many startups do not have sound business models. The only way they can survive is by raising money. But why is this the case?- Published by Kunal Chowdhury on .
The world economy is in turmoil. Inflation is going up every few weeks. Prices are getting exorbitant. The world seems to be in chaos. The U.S.economy has had two consecutive quarters of negative growth. This indicates that recession is on our doorsteps.
The common people have been hit hard. Many people have lost jobs because of downsizing. Companies are trying to weather the storm.
Startups have been hit the most. Venture capitalists have become more conservative with their money. In 2021, every Startup was getting money. This year, the entire opposite is happening.
Startups that received money before are entirely shutting down. They cannot pay their expenses because of no positive cash flow.
But is this the case for every Startup? If you look closely, you will see many startups still running successfully. These startups have some common traits that you can use for your business.
Many startups do not have sound business models. The only way they can survive is by raising money. But why is this the case?
It’s pretty simple. These are loss-making companies. As they scale, their losses also increase. Zomato is a prime example of this scenario. They keep raising money to no avail and no profits.
You will not make money if you keep undercutting to gain market share. And once you get the market share, increasing prices by too much will cause user outrage, as with Uber.
That’s why it’s essential to have a sound business model from the start.
Zerodha is the perfect example of this. They are entirely bootstrapped and are profitable. They don’t spend an insane amount of money on IPL ads. They let the product sell itself as they harness product-Led growth.
They charge a flat rate for equity transactions which is barely anything. They make most of their money from active traders who use leverage.
Zerodha’s use of a simple business model has made them successful.
Companies for a long while depended on great sales and marketing teams to sell an average product. Unfortunately for them, people have become much more aware in recent times.
Everyone has access to the internet. So, people can easily look up products and buy the best ones.
That’s why it’s important to create good products first. This way, the products can sell themselves, just like in Zerodha’s case.
Many of the successful products that have come out in the past decade have been Product-Led. Slack, DevRev, Calendly, and Notion are all Product-Led companies.
These companies focus on creating irreplaceable products that people want and need. Word of mouth marketing helps Product-Led companies beat their competition.
As mentioned above, Product-Led companies create such good products that they sell themselves. As a result, customer success and marketing teams merge into one entity.
Let’s look at a few other reasons why Product-Led will help companies weather this recession.
Product-Led companies do not roll out a polished product at the start. Instead, they release an MVP in the form of a beta product.
Users get invited to test out this beta. This lets them get a feel of the product and understand how it will solve their problems and improve their lives.
But the main point of the MVP is user feedback. Getting important feedback at the start helps startups to remove unnecessary features and double down on the important ones.
Users act as testers. They’ll find bugs the fastest. And startups can fix their product accordingly.
Product-Led companies make and design products for the customer. They do this because they communicate with their users through various social media channels such as Slack, DevRev, Discord, etc. User pain points are fixed immediately.
When users are happy, they recommend the product to their friends and family. This leads to exponential growth and immense reach.
Users are happy with the product and continue to use it. User retention and conversion rates are high as a result.
Product-Led companies use free trials and other freemium models to get users to try out their products. Potential users can test out the product with limited time or limited features.
This strategy leads to faster acquisition of customers, making it much more efficient than traditional sales techniques. It also results in a lower acquisition cost.
Users learn about the product through word-of-mouth marketing. Growth is exponential.
Good UX is a result of product-Led growth. The flow is very simple for the user. Clicks are at a minimum, and navigation is easy.
Product-Led companies are constantly analyzing user behavior and engagement to improve. They use tools like Google Analytics to get detailed insights. They use these insights to improve their product to suit users’ needs.
PLG companies have exponential growth because of word-of-mouth marketing. One person recommends the product to two other people, and so on.
This results in faster growth than products that use other growth techniques.
In bad times, companies must have good relationships with customers, investors, and users.
That’s where a customer relationship management tool comes into play. A CRM helps you manage your company’s interactions, bills, relationships, and more.
It helps you will sales, customer service, marketing, recruiting, and more.
CRMs have traditionally been designed to cater to B2B companies with clients. DevRev changes this dynamic by offering a DevCRM for product-Led companies. This CRM brings developers and users closer and ensures that both parties are satisfied.
This bear market is an eye opener for companies. Companies that adopt the above points will survive and go on to become unicorns.
Product-Led companies with sound business models will dominate the markets in the coming years. These companies have the highest customer satisfaction and keep improving with the best tools.
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