How to build a winner during challenging times
Here in Israel, we’re nearing the end of the first quarter of 2024 while experiencing an unprecedented period of difficulty that began even before October 7th. But as we have learned from previous challenging times, we can also extract positive outcomes from the hardship. It requires us to be aware of how to leverage the atmosphere of challenge in order to ultimately build even better.
Drilling down to the tech ecosystem, Israeli startup founders now find themselves in an incredibly competitive environment where overall investment has decreased. The winners will be those able to increase their success not only despite the difficulty, but by leveraging it. Below, let’s examine the actions and choices made by strong companies in challenging times. Let’s start by identifying the positives that Israeli founders can take from this situation, and then explore what strong companies tend to do to push through challenging environments.
What are the positives in a challenging environment?
1. High-end Technologies: Entrepreneurs who dare go out and raise funds successfully in today’s market may prove to be stronger entrepreneurs, equipped with more mature ideas than before. They’ll tend to focus on high-end technologies which they believe can solve a major pain for a bigger TAM.
2. Healthy Companies: The companies built during times of challenge tend to create a healthier, more meticulous and more efficient infrastructure. They consider the next stage at the forefront, and strive to meet high goals they have set for themselves.
3. Team Quality: Since talent becomes concentrated in challenging periods, we see stronger development teams at the companies that are actively building. Imagine a scenario where 200 startups for AI were opened – what are the chances of creating a development team of 5-10 excellent engineers in the field? Fewer new companies in the same space mean a deeper talent pool for those strong enough to push through.
4. Must Succeed Spirit: Founders who have already raised funds and are actively building are now in a situation where 'there can be no chance that I will fail’. After years of hype pre-2023, this driving spirit took over across the startup mentality. While much of the competing ecosystems around the world are less mired by global market changes today, the Israeli startup ecosystem is still facing a period that requires incredible resilience and has cemented this thinking across the local ecosystem, making for a stronger set of core beliefs about what is required to outrun the odds.
What do strong companies do to succeed in challenging environments?
Get the management team – and team management – right
Startup CEOs
As the CEO, you should define the company’s vision, establishing its “North Star” for the benefit of your management, wider team, investors and other stakeholders. In order to do that successfully, the CEO should always be mentally prepared for ups and downs, even in the best of times. It's a process to make it through extremely challenging environments, and you’ll need to equip yourself with a broader set of tools than in previous roles. Ensure that you, as a CEO, have the necessary support – whether it's in the management team or a personal advisory team by your side. As always, stay self-aware about your own strengths and weaknesses, to stay ahead of any personal pitfalls or blindspots.
Startup management team
The strongest management teams consist of solid, trustworthy people who, on one hand, work well together, and on the other hand, each bring different perspectives to the board room, even – and especially - if they are not the easiest to hear. Every person on the management team should be able to strengthen others’ weaknesses, and also be open to listening to each other.
It's important for founders to know how to recruit a management team – and even more important to knowhow to manage the team correctly. Remember that by hiring your first management team, you are expanding the leadership circle (and company DNA!) beyond the startup’s founders. Empower each member of management to feel they are constructively contributing to the company’s core. They will be, whether they mean to or not, with their own attitudes, work styles and visions; it’s better to make sure these all align with your existing vision as a CEO/founder of the company.
Build a defensible product
Build a strong product with technological fundamentals you can show are actually a game-changer. It’s important to distinguish between deep/core technology or infrastructure versus a feature or an app. Solving a major problem with a big TAM is the basic ingredient which will enable your growth potential.
While building your product, remember that we live in a dynamic environment which constantly changes and recreates itself. You must keep up the pace and competition, be aware of the new technologies, trends and anticipate the possible evolution and breakthrough your product can have. This has become painfully obvious to many companies that invested in building their ‘core technology’ on top of GenAI platforms, for example, and may find themselves completely wiped out by a sudden ChatGPT feature update.
Keep your eye on the commercial side
Seed-stage companies
Early companies are going to have to go to market as quickly as possible. The key is to find one or a handful of design partners for feedback in order to make the correct decisions about your product and establish the potential relationships to convert to future paying customers.The sooner the company meets a large and diverse number of potential customers, the chances of success increase.
Advanced companies
It’s critical to prioritize satisfying existing customers, who should, in most cases, be the main growth engine. Later on, collaborations with strategic partners are key. These connections can, in turn, fuel the sales engine for your products and a growth engine for cross sale and expanding the company's product portfolio. In that regard it is important to look for an integrated product or solution which can easily increase the value of your partners’ product (rather than distributers who offer your product as one among many other items).
Israelis
In the decade previous to 2023, the Israeli high-tech ecosystem was showing incredible growth in the number of successful companies, as well as scale and valuations. Why? I believe that our advantage as Israelis exists in our creative thinking and the ability of both individuals and companies to be resilient and adaptable in changing situations (which we here know plenty of). This resiliency is an underlying advantage of our culture and ecosystem, and every startup born here is embedded with this blueprint and potential.
While it’s no secret that Israeli DNA is different, the flip side of that is understanding that it also must complement or adjust in terms of the way international partners think, prioritize and process. There must always bean openness and awareness of this fact. There are evergreen local, cultural, or procedural adaptations that must be made in any international business relationship.The key for Israeli companies until now and going forward, is the acknowledgment of the need to expand our chances for high growth and success by taking into account the expertise, methods and knowledge from outside of our ecosystem, whether by international consultants familiar with the field as force multipliers, or by learning models and processes of big global corporations that have already proven successful.
Remember your ‘North Star’
Throughout the entire startup building journey, you must keep focus and be guided by your ‘North Star’ which by definition remains the same regardless of your stage or size – it will help you identify your technology, product, team’s DNA, strategy, target customers and key parameters.
No doubt that we in Israel look forward to a better future on across all fronts. It’s important for us to feel confident where confidence is due - that the talent is here and the new perspectives, experience and skills that will arise from this challenging period will result in strong companies down the line.
