The sky is falling in the venture financing market! Warnings, exhortations and admonitions are being written and spoken everywhere. A market in which capital was abundant is now increasingly constrained. So what’s a startup to do? The reality is that you probably shouldn’t change anything about your business if you’ve been running it rationally. Capital is really only a tool at the early stages. Capital enables you to exist, it doesn’t enable you to win. More important than ever is being able to answer one question. What are you going to be the best in the world at doing? Answering that question will help your company focus on unlocking its superpower, the skill or asset that truly sets it apart in the market. And that will allow you to survive, and even thrive, in any fundraising environment.
As a VC, I see a large number of startups, often times multiple startups pursuing the same opportunity at the same time. In all of these situations, Hunter and I care a ton about the “Why”. But just as important is the “What”. And the “What” has to be a vision that contemplates what will truly differentiate the startup in the long term. Too many companies we see think that being first to market, raising the most capital and spending it quickly will lead to winning. That’s never been accurate, and it’s both wrong and dangerous in today’s market.
Google is best in the world at search. Facebook is best in the world at building a social network. Apple is best in the world at building integrated software and hardware for consumers. All of those markets are or were incredibly crowded. But knowing what they wanted to be best in the world at helped them figure out what superpower they needed to develop. Google knew that to be best in search in needed the best data infrastructure. Facebook knew that if it wanted the largest social network it needed a competency around growth of that network. And Apple knew that if it wanted to build devices for the average consumer, it needed simple and beautiful design. Arguably, these superpowers didn’t just help those companies win. These superpowers helped them maintain their market leadership as well.
Whether you’re bootstrapping or flush with VC money, it’s worth asking what your startup’s superpower is going to be. Once you answer that question, you can focus on the development of that superpower rather than on things that make you temporarily different or different in a way that is easy to replicate. Success at building your superpower will lead capital to seek you out, even in a market where it’s trying to hide.