Grow, don't bloat

During a recent conversation I had with a Startup Founder, I realized that he was investing his time, efforts, money and other resources in strengthening his supply base. Nothing wrong with that, except that the existing capacity was barely utilized. And to top it all, he is offering variants of his core offering for another niche audience. Worse still, he is parallely trying to enter another geographical market. And he is a solo founder!!

During the interaction, he shared that while there was considerable interest in his offering which was reflected by the number of downloads of his app, the conversion to usage was quite low to the extent of 15 to 20%. When I started probing into that, it came to light that he was suffering from a classic startup syndrome of 'trying to attract a motley of customer profiles without clarity on why they should use his service'. As a result, many of those who tried his service once have not become regulars, hence throwing all calculations and assumptions of Customer Acquisition Cost (CAC) & Life Time Value (LTV) into disarray.

My suggestion to him was to stop every other activity and focus on getting his customer profile spot-on and then build a very clear & specific Value Proposition for that profile.

Am not sure if he will take it up because it is not a very glamourous activity and doesn't generate any PR unlike announcements of adding a few more partners.

Founders of Startups need to understand that they must work on growing their supply and demand sides constantly and not at the expense of the other. Its a good problem to solve when you have customers but not enough capacity to serve them like a crowded restaurant with few waiters but the converse of having hundreds of salespeople waiting on very few customers is a nightmare!!