Why be ‘lean’ when you could run a ‘fat’ startup?

By Editor August 28, 2014

Sagi Bakshi, ironSourceBy Sagi Bakshi, GM of installCore at ironSource

From diets to startup advice, everyone is promoting the idea of ‘lean.’ But being told to create a lean startup was one of the first (of many) rules we ignored when we established ironSource. Instead of concentrating on one product for a sustained amount of time, we quickly developed four core products with unique revenue streams. Instead of remaining content with those, we also established our own internal innovation lab to grow mini-startups within the larger company.

Running a ‘fat startup’ has its advantages. By diversifying your company, you are more secure than if all your eggs were in one basket, and you are able to take risks in one area knowing you’re covered in (several) other ones. But there are things you have to do to create balance when running a ‘fat’ startup. Below are some of the steps we took at ironSource to make sure we could start and continue to grow as a fat startup.

1. VC Funding

Too many startups underemphasize the importance of revenue and profit. While going after VC funding is the first step many startups take to get off the ground, in many cases approaching VCs from the very start can hurt your ability to generate revenue later on.

Creating a regular source of revenue means you are able to sustain a ‘fatter,’ more diversified business, which itself feeds back into your revenue streams. It will also put you in a position of relative freedom and independence. While investors can bring a lot more than money to the table—expertise, advice, experience, connections—going after your own profitability before pursuing the investment of other people’s money gives you the freedom and flexibility you need at the beginning to take your company in the direction you want, and helps create a more balanced relationship with investors later.

2. Product vs. Solution

When starting up and starting out, it’s critical to keep your vision expansive and your attitude to your product flexible. Often, in the process of creating one product you’ll find yourself pointed in a new, more profitable direction, and it’s important to have the agility to shift.

When ironSource first started out, we had developed a great product, but we found it incredibly difficult to get that product distributed to the right users, delivered successfully to their various devices, and then monetized and marketed effectively. So, we developed a solution to help our own product get off the ground, and in so doing we ended up developing a solution that could be useful for other software developers facing the same problem, forming the basis of what our company is today.

Focusing on your product is important, but it’s just as important not to get tunnel vision. Don’t be afraid to broaden your outlook and pivot to other areas when you become aware of more substantial problems your technology can solve. Chances are, when you come across a problem, others have encountered the same one, and by coming up with a solution to that pain point you are developing a product with a target market ready and waiting.

3. Keep A Lean Mind

For most startups, the goal is to graduate from startup to profitable company. In order to stay successful, however, it’s also important to preserve the disruptive energy and innovation that drives you at the beginning of the process. In our case, we created our own internal innovation center—ironLabs—to help keep us close to the needs of a developer of a young app. While this is not necessarily a solution for everyone, take the time to start new projects from scratch, whether that’s developing a new product, targeting a new market, having internal hackathons, or creating a new feature. The experience of trying to solve a problem and starting from the ground up will ensure you maintain a bootstrapping, innovator’s perspective, and that your company keeps its edge even as it grows.

4. Invest In Your Employees

At the beginning of their lifespan, most startups are likely to be thriftier with their money, and in many ways this is exactly the way it should be. When funds are low or revenue non-existent, it makes sense that your instinct is to be frugal. But, while being careful with your spending is always important—not just at the beginning, try to set aside some funds to go towards making your employees feel valued and appreciated. It may not be a huge bonus or a company holiday, it could simply be a round of drinks once-a-month at a local bar, but taking a moment to be less ‘lean’ with your money will not only make your employees happy, it will also demonstrate to them that they are part of a venture that is doing well enough to spare some funds for simple ‘fun.’ The likelihood is, the people you work with at the start of your company’s life are the ones who are going to stick around and give you the most value. Investing in them in small ways from early on will pay off in a big way in the end.

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Sagi Baskhi works for ironSource, the world’s leading digital delivery company. He is the GM of installCore, ironSource’s leading digital delivery platform which has enabled 2.5 billion successful installs to date.