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The Startup Advantage

Startups face highly competitive markets and operate with limited resources.  They must compete with incumbents who have deep pockets, existing relationships, and more mature solutions.  They must find a way to get noticed in a noisy environment, all while managing cash-burn in an environment in which there are always more things to spend money on than money to spend.

Despite these challenges, a host of new startups enter the market each year. While not all succeed, many do. There is a strong ecosystem of startup incubators, angel investors and venture capitalists, and even corporate innovation funds investing in startups.  

Despite the challenges, startups have several distinct advantages over larger corporations.

  • Ability to innovate: They control their own destiny and are free to be creative. This environment attracts creative individuals and has resulted in many groundbreaking new technologies. Startups are not limited by conventional thinking, existing corporate strategy, a heavy workload on legacy projects, or the need to convince an existing management team to take a new direction. 
  • Not constrained by corporate structure: Large corporations, out of necessity, have defined structure, roles and processes. This is absolutely necessary to maintain the productivity and success of the organizations.  With thousands of employees, everyone must be marching in the same direction or chaos will ensue.  With this structure, corporations are able to deliver large, complex and critical solutions. While necessary, it slows innovation, resulting in an advantage to nimble, innovative startups.
  • Able to take greater risks: Corporations deliver critical products and services, employ thousands of people, and must do so while meeting hard to achieve financial goals. Risk management is engrained in the mindset of executives and the culture of the organization. Startups have little to lose and can take much greater risks. 
  • Flexibility: Startups can quickly pivot, changing their business model, strategy, target customers, and even the solution they are developing.  They don’t have technical debt to deal with, existing customers who rely on their current products, or existing processes that limit change. Startups can adapt as they learn. Many, perhaps even most, startups find success with a solution that is different from their original vision.
  • No revenue stream to protect: Established companies will go to extreme lengths to maintain their existing customer base and revenue streams. Time, resources, and creative energy are focused on this problem. New solutions with great potential are often ignored because the company is either focusing on exiting revenue or concerned that the new solutions will erode legacy business.
  • Low overhead: Startups are lean. The low overhead allows them to be flexible on pricing and to build a successful business with lower cost business models.

While the current economic climate poses challenges for all companies, the startup ecosystem continues to thrive. Venture capitalists are investing in promising companies, businesses are looking to buy new and innovative products and services. Corporate buyers continue to look for innovative startups they can acquire to drive growth. This is because startups can do things that established companies either cannot or will not do. 

Thinking of leaving your corporate job and starting your own company? There are great opportunities ahead! Like all worthwhile endeavors in life, starting, growing, and selling a company is incredibly challenging, but can also be extremely rewarding.