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Technology

Why startups need an anchor as they pursue disruption

Innovation
Innovation needs a strong base from which to either unseat incumbents or open up entirely new markets. FILE PHOTO | NMG 

This year, capital raise announcements have come in hard and fast. Maxime Bayen of Greentec Capital has been updating a public tracker on Twitter that puts the latest numbers at just under 80 startups having raised over $1 million for a total of over $1.1 billion closed from 168 investors. Several industry verticals seem to be mopping up all the attention, namely, financial services, logistics, agriculture, and education. But as the tides turn for what has been a long patchy season of inaction by the investor class from the angels to the series X heavy hitters, we must ensure that the fundamentals of the businesses are sound and not just pump-and-dump operations.

Innovation needs a strong base from which to either unseat incumbents or open up entirely new markets. Startups must assume positions in key and 'immovable' parts of any ecosystem, supply chain or production line for them to stand a chance at sustainability beyond any hype that their industry segment might undergo.

In financial services, for example, being a payment gateway made for a great business until suddenly it did not as the race to zero transaction fees started. Payments is getting commoditised and the base from which a startup here needs to operate from would either be a bank, telco or distinct owned product.

In agriculture, it has always been about removing the middleman. Startups come in trying to connect the farm to the fork, off price discovery and demand aggregation positions. Time has shown that the true opportunity is in reimagining the role of the middleman, moving downstream and getting dirty with actual farm operations, or value addition, the three base positions.

In logistics, which covers the movement of people and things, connecting riders or consignment loads to available capacity is no longer enough.

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Many unicorns in this space are still trying to figure their path to profit yet traditional players are still thriving with their unsexy models. Thinking different about asset ownership and offline elements that are central to service experiences is key.

Operating in the middle with a simple marketplace or mediator model is not a defensible strategy long-term as you either exist on the patience or cluelessness of an incumbent for whom you are teasing and testing the market or offer proof of value to a newcomer who would then, using a core anchor position, get to bullseye product-market fit much faster.

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