This short two-part post offers a glimpse into how BIP Ventures selects and supports startup companies. The insights are gleaned from MB on VC articles throughout 2023.
Too many Venture Capital firms stop short of fully assessing how prepared a potential portfolio company is to capture and sustain market opportunity. At BIP Ventures, we spend a lot of time identifying all the markers of a great opportunity for our founders and investors. Experience has taught us that the most successful startups balance track (market), jockey (team), and horse (model) early on in their maturation. With that in mind, it's vital to examine how innovative a startup is in its technology and its business.
In the early stages of a startup, the market is a key success factor. While it's great to chase a good market, it is not enough. The strong market must be filled with compelled buyers. These are people who don't waffle. They know they need the service or product, and they are willing to pursue and pay for it. (Nothing can make up for market indifference to a product or service.) The advantage is even stronger if there is limited competition to meet the needs of the market and interested buyers.
Structure matters. The odds are low that a startup can capture and nurture even the most promising market simply because they have an idea and a smart team. Thoughtful governance and the right business model will increase the likelihood of success.
Preparation is paramount. In the U.S., in particular, first-mover advantage is real. It is also fragile. If you've entered the market early and captured willing buyers, but lack the preparation needed to lead the category as it evolves, first-mover advantage is likely to erode.
Market opportunity evolves. Once you have spotted an attractive market opportunity, meet it with a strong value proposition and enduring, high-quality business model. This is not a set-and-forget effort. Build a talented and experienced leadership team that can continue to execute as the market matures.
Success attracts competition. Early success is usually fleeting. Maintain a competitive advantage by continually adjusting and refining the value propositions to meet the desires of the buying audience.
After studying startups over the past two decades, we have seen that there are plenty of technological innovations that don't quite fit the market, can't solve certain business challenges, or don't meet human needs. So, alongside considering the markers of a promising opportunity, we look at innovation, both in the product/technology and the business model.
Technological innovation matters from a product and market standpoint. Most founders seeking investment capital are leveraging somebody else's technological innovation with a distinct business model and opportunity (e.g., AI-everything in 2023). We consider whether the company has built something distinct or if it has a valuable new use for existing technology. Next, there's business model innovation. This is how the company is built to meet the market, satisfy willing buyers, and sustain competitive advantage as it matures.
Both are equally important.
Consistently exceptional outcomes arise from being clear-minded and thoughtful. That truth has not changed in the 17 years we’ve been supporting founders. We zero in on startups that have all the right factors to create real, enduring microeconomic (market) traction. And from the earliest stages of a company's life, we help to develop durable competitive advantages across the market, audience, product, and business model.
These are the advantages that persist through time, regardless of the challenges a company faces as it grows.
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