Startups Vs. The Blue Ocean

January 13, 2011

The second type of startup that exists is one which brings a new product into a new market. In this type of startup entrepreneurs are operating in a blue ocean. They are moving forward and creating a market that has not existed before, or solving a problem for consumers that they did or did not know existed.

The good news behind new markets is that the initial product is irrelevant at first. The market that has been created is unique and ubiquitous to the startups that are operating in these blue oceans. Once competition enters into the market then further innovation is required. The downside to this is that the market has not been defined and requires intensive research as to whether or not a large enough market exists. With startups that are operating in an entirely new market the main question behind investment isn’t “How do they compete?”” but rather “How will they convince people to form the market?”

When it comes down to making an investment into a Blue Ocean startup, into a startup that creates an entirely new market, we believe there are three keys factors to take into account. Passion, Coachabilty & Intellect.

Passion:

This is the absolute belief, the beyond a shadow of doubt feeling that what the startup is doing will work. The faith that their idea will not only become a reality but a revolutionary reality at that. If the startup doesn’t have this belief in themselves, their team and their What then chances are they simply will not be successful in creating a market. The team that’s put together should be a group that understand that the normal workday will probably look like 18-20 hours of pure productivity. Without this passion, Blue Oceans don’t succeed.

Intellect:

Passion is one thing, and it’s important, immensely important but it has to work in conjunction with intellect. Being passionate about what the startup plans to do, and knowing how to do it are two entirely different things. So look closely at their plans, is the product done? Is it well thought out? It is disruptive? Look at it closely and think “is this going to do what cars did to carriages?”

Coachability:

This is your tie in. When you’re looking at startup companies you want to see immense passion and intellect, but if that aren’t coachable then that passion and intellect will spread with no focus. Look closely at the startup company and its team, are they attached to the idea they have created or what their idea does? The important distinction to make is between what an idea is and what the idea does. If a startup is not willing to focus on what the idea does chances are they won’t be very successful in creating a market.

When it comes to this Blue Ocean strategy of creating an entirely new market place Cirque de Soleil may not come to mind as fast as Compaq, who created the laptop industry, but they did create a market nonetheless. Through a unique blend of opera, ballet and the circus Cirque de Soleil not only created a market but continues to innovate and reinvent itself to stay ahead of whatever competition may emerge.

The financial struggles that Cirque de Soleil went through at first to begin and then to expand speak not only to the depth of capital needed to fund these ventures, but the patience required from investors in order for them to be successful.