Case Study: 500% Growth Rate? Yeah, It's Possible
How fast would a new venture have to grow in order to earn the title of history’s fastest growing storage start-up?
The answer, according to my recent interview with Ash Ashutosh, Founder & CEO of Actifio, is “500% year-over-year growth for the last five quarters.”
And that’s the rate at which Actifio, a start-up that makes “copy data management (CDM) radically more efficient,” is growing. Through a combination of skillful strategic choices and good luck, Ashutosh’s venture is growing so fast that an IPO could be as close as five quarters away.
Here are the four key choices Ashutosh made and what you can learn from them:
1. Target a huge market with no competition.
He told me that CDM is a $34 billion opportunity with no competition. The reason that there is no competition at the moment may be that the incumbent storage hardware companies like EMC and IBM would have to take a big bite out of their core business in order to match Actifio’s offering.
The lesson for your venture is that you can boost your odds for rapid growth if you target a big market where the incumbent competitors hold a big price umbrella over the industry. Simply put, this means that the competition is charging customers so much money that if you can come up with a less expensive solution, you may be have customers clambering for your product.
2. Offer customers a quantum value leap.
Just offering a lower price than competitors will not win you a rapidly growing share of a big market. For that, you have to offer customers what I called in my about-to-be-published eleventh book, Hungry Start-up Strategy, a Quantum Value Leap--a huge improvement in bang for the buck.
Based on the rate at which it’s adding customers--Ashutosh expects Actifio to grow from 200 to 800 customers by the end of 2013--Actifio certainly does that. According to Ashutosh, Actifio’s product can cut by 95 percent the “data footprint” that companies create in their CDM process while reducing by 75% the amount of “network bandwidth” required to move it around their data centers.
Some customers save “at least $20,000 per month in tape management and $15,000 per month in backup costs. And the inefficiencies [Actifio can eliminate] are astounding--some companies pay $32 million a year now just to maintain their backup software.”
And while chief financial officers like the idea of reducing such costs from $890,000 to $150,000, the users love how “dead simple” the product is to use.
If you can offer customers that kind of Quantum Value Leap, they will flock to your door.
3. Build a world-class team.
No CEO can achieve these things alone. Rather, an entrepreneur must have the ability to build a world-class team.
Ashutosh has also done that. His top executives have all had prior experience running their functions--such as sales, product development, service, and finance--in other successful companies.
And he was able to attract them to Actifio and create an environment where they are happy to work together to achieve future success. The reason? They are excited to join a company with “the opportunity to capture a leadership position in a $34 billion market with no competition that is growing at 500% annually,” according to Ashutosh.
You can take two key insights from Actifio’s ability to build a world class team. First, top people who have achieved prior success are eager to take another opportunity to see whether they can do it again. Second, if you can persuade them that your start-up’s odds of success are far better than average, you just might persuade those A players to join your venture.
4. Fight complacency.
Finally, if your company has achieved any success, it will become vulnerable to the belief that it can start coasting. And once that idea takes hold, it’s just a matter of time before your start-up begins a fatal tailspin.
Actifio is remaining alert to those dangers. As Ashutosh explained, “2012 is our break point.” By that, he means that as the company “is going from start-up to grown up.” And that means, he has been talking to his employees about how important it is “to consolidate our focus on quality when we release, sell and service our products.”
He expects that another such break point will occur after Actifio’s IPO. By then, it will have revenues “between $100 million and $150 million and will control 10% of the market.”
He expects that these results will make other companies aware of the size of the opportunity and attract competitors. And then Actifio will be tested to see whether it can innovate to stay ahead or turns into a company that squanders its early lead.
So think about the future challenges facing your start-up and prepare your people to overcome them. And if you learn this and Ashutosh’s other lessons, your start-up probably won’t surpass Actifio’s growth - but it will be much better off.
Strategy consultant, startup investor, teacher, corporate speaker, pundit, and author of 11 books, Peter Cohan has invested in six startups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael E. Porter.