This article originally appeared in Techstars.
When startups are out to create value to customers, they are often focus on a single path of value delivery – from company to customers. For many startups this is why they exist; to build solutions for problems in the market. The focus is on building products and services, and the allocation of resources to fuel the sales and marketing engine to get those solutions into the hands of customers.
This is the easy part: the playbook for building product and acquiring customers have evolved massively over the last decade.
What is more complicated and transparent is how startups receive value in return for their innovation specifically through price. How do startup leadership teams actively manage pricing or find ways to capture more value through pricing? Often called a dark art, pricing is a perpetual challenge for startups not only to create strategy and learn new techniques, but also the active management of customer perception and value proposition creation.
As a result, startups fall into a state of value debt where they are continuously receiving less value in exchange for the value they deliver. The short-term impact is the maintaining a system that requires greater results and applies pressure to already limited resources. The long-term impact is on the sustainability of the system and company without outsized injection of resources (e.g. investment). The unfortunate reality for many startup is value debt takes them down a path of potential failure.
We have identified four signs that a startup is in value debt. These signs are identifiable and measurable ways a startup can determine how far into value debt they are in, but also identify ways to work there way out of value debt. Each sign focuses on three areas: value through pricing, customer value drivers, and acquisition.
Read the full article on the Techstars website.
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