Invest in Capabilities before Building Awareness

5:06 AM Suvir Sujan 1 Comments




The last few years Startup India has seen an abundance of cash. We had Hedge Funds doing Seed and Series A deals and various Strategic and other investors investing large monies at the growth stage. Many entrepreneurs were flush with funds early and were spending the monies in marketing companies (especially B2C) versus building them.  In the race for market share, they were building awareness before building capabilities or efficiencies.  The common perception was that "this is how the leading companies were built in China. Grab market share first and build efficiencies later." The difference in China is given the regulatory and language hurdles, international companies, rich in experience, capabilities and capital couldn't find it easy to compete there. So local companies that got funded were able to gain market share on the back of inefficiencies and below desriable service levels and then had the luxury to then work on the capabilities once they were the only one standing.

In India, being a relatively open economy, the playing field is a lot more open and allows for well capitalised international competition to flourish.  International players have the know-how and the capital. If they are able to build the right entrepreneurial team on the ground and transfer the know-how, they can be formidable local competitors.,  Local Entrepreneurs who have been lucky to raise a lot of cash early should first invest  in building differentiated capabilities over awareness as it can provide a better sustainable advantage even if it means giving up the maniacal goal of market share in the earlier days.  You still need to be aggressive in building awareness but once you have your capabilities built, you will hopefully need to spend a lesser dollars to attract customers by leveraging word of mouth as a result of better service levels and experience, the outcome of smart  investment in capabilities.

1 comments:

Hi Suvir, can you elaborate "capabilities". Also will an investor be willing to wait untill the company develops these capabilities as they are bound by an exit timeframe