That means to be a successful entrepreneur and generate decent profits then you do need to develop something to make your product or service stand out. You need to be able to articulate a compelling reason why customers might continue to hand over their moolah to use your products or services. If you don’t you are selling a mere commodity. And probably not for long
That’s pretty frothy. In such rising markets the herd moves together and the fundamentals may get forgotten in the search for rapid returns. But, all is not lost. Some in the US and UK that have previously signalled their intent to raise funds publically seem to have rapidly got over the sudden rush of blood to the head.
Making a necessity out of Virtu
In the US earlier this year, high frequency trading firm Virtu Financial suddenly `delayed indefinitely` its IPO. Blaming regulatory approval for disrupting its intended float turned into a wholesale retreat in the face of journalistic expose of some of the less savoury but fundamental aspects of its business that would have seen potential investors run a mile.
In the UK conventional `bricks and clicks` fashion clothing retailers Fat Face and BlueInc pulled their UK IPOs blaming `market difficulties` and have recently been joined by challenger bank Aldermore which, despite its modern digital platform, AnaCap, is still a bank established at a time when the mere word has become toxic to many firms requiring finance.
Back in the US Square and Box, on the other hand, have not used the word `indefinitely` but are dragging their heels having been re-scheduling their IPOs for most of this year.
The ‘market volatility` or `weak demand for technology stocks` excuses have, of course, been rolled out by these two to a response of equally rolling eyeballs in the market. But it strikes me as pretty obvious that the real reason is that the IPO process has highlighted to these comparatively early stage companies is that they have very little to differentiate them from better positioned competitors and they are frantically playing for time whilst they and their investors figure out what might save their blushes, if not their bacon. In contrast, most of the other firms had already worked out they had nothing and quit.
To reiterate, without a monopoly restricting choice customers need to be persuaded that there's something special for which it’s worth paying more. In the absence of obvious and fundamental difference expensive branding, marketing, sales and distribution have to deliver that in the mind of the customer. Just look at the money mobile network operators spend on trying to convince you that you care about their brand, rather than the best value airtime package, so they can continue to trade on wafer thin margins.
Queue-loving slavering sycophants
Anyway, I digress. Back to will-they-won’t-they Square and Box. What is it that they're doing, can do or will do, that prevents them from being viewed as just yet another small supplier of a standard commodity?
And, of course, to get to that situation you have to overcome very high barriers to entry. But if your business is essentially a point of sale app aimed at replacing traditional credit card terminals and cash registers you are up against the big merchant services and consumer specialists – Visa, MasterCard, Amex. These have massive ecosystems, resources and customer reach and could start to squeeze you very quickly if they wanted before any significant disruption could be possible.