I have been fateful to be in the midst of an unnerving pattern. A pattern which is not only an eye-opener, but highly intriguing as well.
There are these aspects to this pattern:
- Perceived Disruption
- Disruption Momentum
- Reality Check
Perceived Disruption: These are the startups who make waves in the market by scoring giant funding rounds. They essentially start positioning themselves as major disruptors, before even they have fared a decent revenue and profitability bull run.
Disruption Momentum: The startups are now funded. I mean, they are now fat with funds. They plough their money into getting expensive offices, lead acquisition, over-blown marketing campaigns. All in the name of staying ahead of everyone else. Gaining the oh-so elusive market share, overnight.
Reality Check: The funders realize that they have burnt too much money in too many bets. They plan to curtail the outflow. They stop participating in follow-on rounds. This not only happens in one, but across most venture capital funds. Thereby, creating a domino effect. The fund crunch gives rise to mark-downs, office space consolidation/contraction, job losses and finally shutting down failed startup enterprises.
Regression: The so-called traditional, archaic companies that were fearing disruption with the advent of startups and their burgeoning funding cycle, now breathe relief. With the fund crunch and tepid investor confidence, these companies start taking advantage of the situation, by better preparing themselves for the future onslaught. With no option left but to perform, they start innovating as well. They become more proactive.
Coexistence: The startups which survive the reality check will slowly become large enterprises in the near future. Essentially, they will coexist with the traditional enterprises. They will become leaner, smarter, and be experienced enough to ascertain the ebb and flow of the market to better prepare themselves. Similarly, the traditional companies rapidly innovates to not get caught like last time, when the startups made serious dent in their businesses.
The ultimate winners are the customers who get to view this epic battle between the startups and traditional companies from their box seats, while the market provides a level-playing field where no one controls monopoly, and is driven by competition. Poor service, complacency becomes feedbacks of the past. Due to the fight for the customer’s wallet-share, the customers end up getting superior products and services.