October 31, 2008

Underdog Advantages - By Sanjay Anandaram

The young CEO of the young company showed me an email from one of his senior team members. The email had a ring of anxiousness around it:
“ With so many big players now entering the market, I don’t know what we can do. All our customers will leave us. The bigger companies have more money, are far better known than us, have a national presence and have so much more experience. I think we should seriously look at an exit”
The company was a little less than two years old, had raised about Rs 2 crore about 18 months ago, the team had an average age of 26 and was one of the first companies in its market segment. I asked the CEO what he thought of the email and whether others in the company too felt the same way. He didn’t tell me what he thought but he was clearly perturbed. Others in the company too felt that it would be an uphill battle for them from now on and becoming martyrs in a battle with the incoming larger corporations didn’t appeal to them. The CEO was undoubtedly disappointed and upset at the loss of “fighting spirit”, “entrepreneurial fire” in his team. But he believed in what his company was doing, every experience in the last two years had convinced him that his company was rendering a much needed service to customers, existing players in the market had recognized his efforts and had approached his company for partnership and customers were writing in to say that they loved what his company was doing.

But he was also pragmatic, if nothing. He too didn’t want to become a casualty in any war with the bigger companies. But he wasn’t going to quickly fold up and go away at the mere possibility of the larger companies entering “his turf”. After all, there was a lot of emotional energy and belief that had been poured into the company in pursuit of a vision.

Lots of startups and companies are confronted by such moments of truth that determine their future course. It is the strength of leadership and the courage of conviction that is tested in such moments. Obviously, a healthy dose of pragmatism is mandatory – living to fight another day is a better strategy than foolishly dying on the battle field. Where pragmatism ends and irrational faith begins is a line that man has tried to fathom since time immemorial, but there indeed is such a line and the specific circumstances determine where and how it is drawn.

Was the startup therefore all just worth nothing now that the market landscape was changing with the entry of the larger players? Did the company really have no options or any weapon in its armour? Did the company really believe that it would never have any competition?

Every startup has its own set of cards to play with, though many just don’t realise they hold these cards! Here are some of these cards:
  • The startup has no legacy and heritage to lose. Therefore, the company can try radically new things without any fear.
  • A niche opportunity (e.g. a geography or a customer segment) may not be attractive for a large company to focus on but can be very attractive for a startup to conquer and build a beachhead on.
  • The entire top leadership team can be mobilized to attend to problems which cannot happen in large companies due to the bureaucracy involved.
  • Speed of decision making and execution are one the biggest advantages that a startup has and should use
  • Flexibility in operations again a function of speed and lack of bureaucracy. Doing whatever course-corrections are necessary to achieve the goals. There’re no policies and long meetings to decide on any changes
  • Lower costs of operation
What do you think? Can you come up with some more advantages that a startup enjoys vis-à-vis the larger companies?


Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.