#012 Tenacity to Commoditization

Much to our delight, the Indian startups ecosystem has evolved from the clone problem. In the process of Deal Evaluation, after having ticked the boxes for innovation, solving real business problems, impact scale; another tangible question for us to answer is – does the startup have tenacity to beat the risk of commoditization?

The startup may have an early mover advantage by offering a unique proposition. However, there may be future competitive risks, which may often lead to downward pressure on prices that comes with too many players, offering similar solution. Simple demand supply mechanism. And so is important to build to mitigate this risk from a future outlook perspective. Tenacity can be built in 2 ways

‍

1. Well thought through Product road map: The strong technology differentiation should be relevant not just today, the Founder vision should chart out a road map for the startup to build continuous moats around the business. This can be achieved by:
   • Going into adjacent solutions for the customer, basically a simple thumb rule of having 7 relationships with the same customer - where a startup makes its margins from 3-4 key offerings that define relationship with the customer, break even on 2-3, and offer additional 1-2 solutions where they may even lose money. This way the startup can fortify their position as the one-stop go-to-person for all issues relating to the customers critical business process / function and build significant inertia for the customer to ever jump-ship even if there are pricing pressures of competition
   • Offering products and features to cater to multiple stakeholders in the value-chain, and as such creating a dependence for the entire value-chain on the product / platform
   2. Vertical Specialization: It is a known fact that output for predictive Data models is as good as its input data, and they refine with the amount of data it processes. Vertical specific, segment focused data would make for a much-enriched data input than data which has a horizontal reference. This focus makes it tougher for others to enter the market with similar segment focused output and results (they may have similar solutions / data models). It is time and data that sets them apart

As Investors we are not just looking for unique ideas and solutions, we are looking for the one’s that have the grit to innovate and execute on a continuous basis, and it is those that built for the long haul.

- Nanika

‍