Unconventional Growth Strategies for Software Startups
July 27, 2023
Imagine embarking on a journey where the well-trodden path is not the one you choose to follow.
In the software startup space, the traditional roadmap to growth is often paved with investor funding, achievement of milestones set by investors, and subsequent rounds of funding.
Yet, what if there was another way? A less conventional, but potentially equally rewarding path?
Drawing from our own experiences in the laboratory information system software industry, we've discovered that alternative routes can indeed lead to lasting success, and these paths are ripe for exploration.
The Customer-Centric Approach to Funding
In the LIS software startup space, the traditional route often involves securing investor funding. However, there's an alternative approach that can offer unique benefits, particularly for businesses that have a strong customer base and a product or service that can generate anticipation and trust.
This approach, which we at LigoLab adopted, is customer funding.
Unlike investor funding, customer funding involves securing financial support directly from your customers. This can be achieved by offering pre-orders, subscriptions, or memberships. In our case, we leveraged our reputation and relationships within the clinical laboratory industry to strike deals with labs. They trusted our vision and were willing to pay monthly fees for a product that would be delivered a year later.
This approach may not be suitable for every business, but for those who can make it work, the benefits are significant. Here are key takeaways for entrepreneurs considering this path:
- Customer Accountability: With customer funding, you're accountable to your customers from day one. This can lead to a stronger focus on customer needs and a product or service that truly serves them.
- Freedom to Innovate: Without the pressure of investor expectations, you have more freedom to innovate and take risks. This can lead to more unique and disruptive products or services.
- Financial Stability: Customer funding can provide a steady stream of income that allows you to build your business at a sustainable pace. It can also reduce the need for debt or equity financing, which can dilute ownership and control.
- Market Validation: If customers are willing to pay for your product or service before it's even available, it's a strong sign that there's a market demand for what you're offering. This can be a powerful form of market validation.
The Power of Perseverance, Vision, and Deep Customer Understanding
The entrepreneurial journey is filled with twists and turns, challenges and triumphs.
But with perseverance, a clear vision, and a deep understanding of your customers' needs, you can navigate this journey successfully.
- Perseverance in the Face of Challenges: The early years of any startup are often fraught with challenges. In our case, we had to live off our savings for the first three years, investing our time and effort into the business with no immediate return. Perseverance is a crucial trait for any entrepreneur. It's about staying the course even when the going gets tough and believing in your ability to succeed.
- Vision as a Guiding Light: Having a clear and compelling vision is essential for any business. It serves as a guiding light, providing direction and purpose.
- Deep Customer Understanding for Continuous Innovation: Working closely with customers to understand their needs is key. It's sometimes necessary to think beyond what a customer is asking for and get to the root of their needs. This deep understanding allows for continual adaptation and innovation.
Adapting to Change: The Impact of COVID-19
The COVID-19 pandemic has been a global disruptor, affecting all sectors and industries, including LIS software companies.
For us at LigoLab, the pandemic was a significant test of our adaptability and scalability. But it also provided valuable lessons on the importance of agility, resilience, and customer-centricity in times of crisis.
- Agility in Response to Rapid Change: The pandemic brought about rapid changes in the needs of medical laboratories. There was a surge in testing volumes and a shift to direct-to-consumer testing. In response, we had to pivot quickly, demonstrating the importance of agility in business. Agility allows businesses to respond to changes in the market swiftly and effectively, ensuring they remain relevant and competitive.
- Resilience Amidst Challenges: Building a resilient business that can withstand shocks and disruptions is crucial.
- Customer-Centricity in Crisis Response: Putting customers at the heart of everything you do is key, especially in times of crisis. This customer-centric approach to crisis response helped us strengthen our relationships with our LIS customers.
Tips for Software Companies Facing This Funding Decision
Looking ahead, understanding the market, building relationships with customers, growing the team, and continually innovating are crucial for the success of any software company
A customer-centric approach to funding, commitment to understanding customer needs, and willingness to continually adapt and innovate are key principles that can guide growth strategies for software startups. These principles are not exclusive to any one company but can be adopted by any entrepreneur looking to build and grow a successful software startup.
Why Customer Funding was the Best Option for LigoLab
After careful consideration of the options in front of us, we decided that customer funding (also known as bootstrapping) aligned best with our vision and goals. Itt wasn’t always easy, and here’s a quick look back for anyone who’s interested in learning how our LIS software company began.
Read More: The Genesis of Ligolab: How It All Began
Now nearly 20 years later that first big decision continues to loom large, serving as a daily reminder that our success as a company is directly connected to our laser-focus on our customers.
What started as a risky venture in a garage has blossomed into a thriving lab information system software company, one that takes the time to fully understand the market and that continually enhances the its products and services to help our many customers future-proof their LIS & RCM operations and grow quickly and efficiently.