The Hockey Curve: Startups are exciting and fun! The most common dream of a startup is to be able to grow exponentially and realise a phenomenal success. This curve is the biggest differentiator compared to a small business. It is about being able to scale, expand and grow to be able to reach both globally and with scale.
Most startups start on a single large dream of a big hockey stick growth. It is the stage where the startup wins after its dip, reaches its market fit and starts growing. At this stage, you slowly start becoming a scale-up to either a Series A or B startup depending on funding.
Most often, the journey is significantly larger than 5 years. The hockey curve or exponential growth occurs after the product market fit pushes towards explosive growth. As far as risk-taking is concerned, the philosophy is certainly boosted by the thought:
Don’t worry about failure; you only have to be right once
Although it sounds romantic, I’m still a fan of being objective about a startup’s performance. If the startup is failing, the best thing you can do is either pivot or shut down. Perseverance for the sake of it can be fatal.
Planning for Hockey Curve Growth
This is usually the fun part and I’d suggest refraining from it in the early stages. It is far too ahead into the future and you wouldn’t know enough to make realistic plans. The best thing to do here is identify a few standard operatives and move ahead.
Identify sub-stages in the hockey curve – product market fit, breakeven point etc. These points are of special interest to your investors. The best you can do is to be as realistic and prudent as possible. Once you’re done, integrate this into both your pitch deck and business plan.
Making realistic financial projections
An investor will expect you to make realistic financial projections. A realistic projection will need to consider direct and indirect costs. In addition, you ought to consider customer churn, inflation and employment costs. The point of doing these projections is that it helps you identify how much funding you ought to ask for.
Also, pay keen attention to the breakeven point after which you start depending on revenue instead of funding. Startups love fund infusion or management buy out during exit.
Adjusting the hockey stick
As you start on your business idea, the hockey stick does take a beating. It takes a lot longer to raise funds, develop products and get customer traction.
Although we would have allocated some time and investment for customer acquisition, this bit initially always seems to take long. If not, the product development does take longer. There is always a continual aspect or challenge the internal psychology needs to be trained about.
Yes, it is about the big payout and the hockey curve yielding us the success we yearn for. But it is also about making the business run and succeed.
The tenacity of your growth plan and financial projections
Well, business isn’t just about failure is it? It does take a beating but also checks upon your tenacity to keep things going. I often read a lot of quotes which talk about the importance of perseverance.
I love perseverance but don’t fall prey to the sunk cost fallacy. You ought to be objective and be ready to move on when failure is clear.
One of the nicest things I learnt in the accelerators is: the FAIL FAST FAIL CHEAP Approach. This tightly connects with the MVP approach which I am a constant advocate of. For any business, success or failure is nothing but mere feedback. I appreciate that as a startup founder, it is hard to not take it personally. But you cannot escape the objective view to find out where the business is heading.
“Don’t worry about failure; you only have to be right once”
–Drew Houston, Dropbox Co-Founder and CEO
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