Startup Categorization

 It is essential to understand  startup categorization if you are planning to set up a business.

The startup entrepreneurs should know which category of startups they belong to. Each Category of startup has its own advantages and disadvantages.

The skill set required could be unique for each category. Idea is only a beginning or a start line in the marathon journey. The execution skills, quick reaction to changes in the environment and overcoming the obstacles encountered are common factors for success irrespective of the category.

Startup Categorization- Parameters

The following parameters depend on the category of business-

v  Customer Acquisition Strategy (Critical for any business)

v  Team Composition

v  Capital Required

v  Risks Involved

Startup Categorization - Categories

 The following are the broad categorization of startups.

1.   Copy Cat

The copy cats are many, as most of the startup businesses are based on already known ideas and existing products in the market. The one who survives is able to find different ways of executing and making incremental innovation. They have to continue to innovate to be competitive.

Some of these startups have tried the lowest price model. In airline industry, a few low cost airlines have succeeded. They addressed the specific needs of customers who want the lowest fares only and are not looking for facilities like food, frequent flyer mileage etc. The overall aviation market has expanded.

No matter which side you’re on, you can’t help but notice copycats in almost every successful new web service or social network that launches. In many cases, the copycats out-innovate and eventually become market leaders. Facebook wasn’t the first social networking website … there was Friendster (which actually patented social networking), MySpace, and then Facebook.- Brandon Eley

“Imitation took nearly a hundred years during the 19th century. Between 1877–1930, the average “time to imitation” of a new product dropped to 23.1 years. This dropped to 9.6 years between 1930–1939, and less than 4.9 years after 1940. In the 1950s it was 2 years. Now it seems to be 12–18 months. From 100 years down to 12–18 months.”in Copycats by Oded Shenkar 

Startup Categorization

2.   IOT/ Share Economy especially for India 

Internet itself has created tremendous opportunities for many low cost startups. The emerging IOT is attracting B2B businesses with potential for tremendous improvements in operations and asset utilization. Sense,  track and analyze has become a buzz word. Startups can be copy cats or find new applications in this area.

Using common office space for startups, cloud computing, asset leasing is some of the new developments.

Examples

1.Arvind eye care – Making Dent on Global blindness

Made a dent in the universe by improving Eye Surgeons productivity. Cost of operations dropped significantly.

2.Shantha Biotech- Unleashing Bio-Technology in India. Impacted the global PRICES FOR Hepatitis B vaccine and made it affordable to poorer section to fight this scourge.

Startup Categorization

  Disruptive Innovation

Entrepreneurship is always associated with innovation. 3D technology is proving to be a game changer. Mass customization is changing to customizing for each individual. Supply Chains has become shorter.

Augmented reality and virtual reality are changing the education, architecture and entertainment industries. 

Uber and AIRBNB have created disruption in personal transportation ,travel and accommodation. Existing businesses are using Government to create road blocks. Customer is the KING in both cases as the costs have come down significantly. This is acting as a deterrent for competition and many of them have improved their service offerings and have also reduced the prices.

Startup Categorization- Conclusion

PIONEERS WHO CREATE NEW MARKETS GENERALLY END UP WITH AROUND 7% OF THE MARKETS THEY CREATE. THE COPYCATS GET THE REST.”

 High focus and getting close to the market is important, irrespective of the category of business.

The first mover advantage is a myth as copy cats can disrupt the first mover by offering better product or service.

The eco systems are evolving for each category of startups.

Proper understanding of the idiosyncrasies of each category will help in drawing risk minimization strategies.

Entrepreneurs who want to play safe would not like to enter unchartered territories.

The motto is higher the risk, higher the reward.

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