Strategies and Positioning of startups in the EDA space
I often see some startup companies especially EDA companies ,which have big aspirations of going for IPO sometime down the lane ( ofcourse every CEO with help from CFO talks about taking the company to IPO)….but if we analyze how some companies are run in terms of their strategies, it wouldnt take much time to realize that their goals are not aligned with their vision….these startup companies forge a relationship with biggies in their field as partners/alliance . They dont (dont want to ) compete with the big companies in terms of their product offerings..they offer complimentary products which go along with the main stream products…essentially they are nice to have and not must have…so how can these companies grow and build a good revenue stream??
For example, take four companies companies , startup company A, a relatively young company B which is still pre-IPO , some tier II company C ( normally categorized based on revenue) and a tier I companies D and E . Company A has many products which all might be integrated and sold as suite of tools or maybe point tools which can be sold seperately depending on how the sales folks want to … all/most of the products they offer work along with the products of C,D and E. The current situtation in the EDA market is, company A is building relationships with B,C,D and E and is positioning itself strategically sothat it has no competitors and it doesnt get biten by the aggressive Tier I or Tier II companies….But what company A is not realizing is..this way of forging relationships doesnt help the company in long run as they wont have much space to grow and they cant increase their revenue stream by just refining their existing products or adding nice to have features…Company shouldnt get lost or spend all of its energy on how to survive…it should rather formulate a strategy which helps the company to survive and generate revenue ( by having a cashcow product) and then it should be able to quickly have products which can differentiate itself from the rest and compete either alone or with the help of alliance it has formed earlier…
In our example earlier, If companies C,D and E cancel their partnerships and they start to offer the features which company A has planned, it doesnt take much time for the company A to look for potential buyers… Companies can forge relationships and alliances, but when creating strategies, it has to do it in such a way that it has space to grow and the alliance helps it in creating even more powerful products and has created uncontested market space…. To create that you need :
1. World class R&D team : From my experience, I see that customers prefer products which which cuts costs ,time or both if you are in EDA…There are many EDA companies whose value proposition lies in simple economic fundaes like reducing time and money spent on other main implementation based tools…there are about 10-12 startup companies operating in EDA space
with this value proposition..
2.Marketing ppl who can brandize the product, a good example is that of XeroX…When they entered India, they marketed it so much..ppl often refer Photocopying as Xerox..you can see Xerox machines everywhere ( not photocopying machines!!) …whatever you do, the customer
should be able to feel it…it should revolutionalize the way your customers think about it…Apple IPOD is one decent example,
3. Sales folks who can sell ice to eskimos and
4. Appln engineers : who can help customers and make them realize the product value ..thereby bringing more business/revenue to the company..remeber the 80/20 rule…80% of the revenue comes from 20% of the customers…so make these exisiting customers happy and bring in more customers by delivering the product value…
and Ofcourse, you need to have good CEO who has vision thats executable and backed by good executives who can strategize the business and take it down the straight path …path which leads to IPO…..
Add comment December 27th, 2005
