The Strategic Startup

I was invited to speak at a strategic management program in France about how I used strategy at AlphaBlock. This is the summary of my talk.

Survival as the Core Strategy

Startups have one core strategy that is more important than any other strategy: the strategy of not dying. If a startup can execute this well, it can continue on its journey of success. Because 90% of first-year startups don’t make it to the next year, and of those that do, 90% die yet again, the odds are stacked against survival. In this sense, survival is the first game plan. It’s like the stock market—you have to do everything to avoid the big loss. Once you experience a big loss, it’s hard to get back on the horse again. Hence, startups that don’t maintain a survival mindset generally don’t make it through.

Defining Strategy and the AlphaBlock Journey

Strategy, by definition, means a plan to achieve objectives by optimizing resources and decisions. I grew many startups. AlphaBlock is my third business, and I am a career entrepreneur, having worked in jobs for just 6 years out of my 26-year working career. Even with this background, I did not think about strategy from day one of building AlphaBlock. AlphaBlock emerged from an advisory business, into a quant research shop, into a smart beta firm, into a fintech, and so on. Now that I look back, it all makes sense how it happened and why we are still relevant—because it was iteration and experimentation around a vocation. As an advisor, I saw that my advice was not always heeded, so I decided to move on to building instruments that managed risk rather than leaving it to the user. At many levels, machines that manage investment are an extension of smart instruments; it’s essentially smart machines managing smart instruments. This vision now looks eerily prophetic, considering it took shape after the Great Financial Crisis.

Risk, Youth, and Intuition

If a startup says that they never had a strategy and were just going with the flow, it’s really not true. A risky strategy is still a strategy. Youth often has a high risk appetite and the capacity for failure; generally, jumping in and then figuring out how to swim is still a strategic approach. I did that with my first business, and looking back, it helped develop intuition. But preparation for taking risk always trumps pure risk-taking. Now that the cost of capital has increased, resources are expensive, and the startup world has matured, the whole ecosystem has grown sophisticated enough that even a person on the street can advise you on the need for planning and thinking before diving in.

A Different Era of Learning

I am a career capital markets researcher, which means I trained myself about markets, studied them, took exams, wrote about them, and learned extensively before I attempted to buy a stock. Maybe it worked out to my advantage because I had limited capital to burn and started working in a time when financial technology was new and there were no cryptocurrencies. I was working in an era where real books imparted more education than TikTok videos, and YouTube had not yet been invented. The mentors were real people you could speak to face-to-face; there was no Zoom or Google Meet. The world of information was slow and steady, and there was limited news that required genuine assimilation—not the endless 24-hour market of today.

A Personalized Framework for Strategy

So naturally, my thinking about strategy is going to be different. Strategy can be so hyper-personalized that there will never be a one-size-fits-all approach for startups. However, this is my general framework for strategic thinking and management. Just like AI needs good-quality data, strategy needs pillars and structures to build upon. For me, there are three key pillars for strategy: product, business, and self. Product begins with an idea and evolves until it fits with the market, either in current times or the near future. Business is about the team, stakeholders, fundraising, the company, the business model, the story, sales, dilution, thinking like an investor, and understanding where the business fits into the competitive forces of the Porter Model. The self is about self-knowledge, self-acceptance, confidence, overcoming imposter syndrome, understanding risk preferences, developing intuition, grit, belief, listening, self-improvement, and contained ego.

There are many more ideas than products, and many more products needed for a born-global solution. For many born-global solutions that aim to create impact, you need to bring these pillars together. In today’s society, if you can’t unite an evolved product, a solid business framework, and a top-notch self to converge into an impactful solution, then your startup strategy isn’t good enough.

Iterating for Global Impact

It took me years to innovate and understand how to build a unique product implement it globally for every investor. It took years to understand the meaning of a business and how to balance the push and pull essential to shaping it into an entity separate from the founder. I am still working on myself.

The Big Strategic Move: Pivoting

My biggest strategic move was a pivot: we went from building anything and everything to working on a plug-and-play model. It required diverting operational capital from servicing paying clients to building a tech pivot so we could break the ceiling of scale. Now that we have come out on the other side, though it feels good, there is no way to eliminate risk altogether. The only way is to think, prepare, plan, and execute. And many times, you can only pivot once. This is why you need to think hard.

If you did not work on the self—on what you expected from the business and from yourself—you could not handle the expectations of stakeholders and team members. The founder’s entity in the early part of the business is dissimilar from that of the organization. To be able to dissociate or differentiate the two is also an important aspect of self-development.

Frugality and Misconceptions About Founders

Frugal founders are a rare breed who might suffer when they realize that they are surrounded by a team that wants to spend its way to success. Frugal founders hate to be treated like an ATM, punched for money and bills without feeling an emotion or heartache. There is so much pressure to raise more and more that stories of founders who raise less evoke shock.

Raising, Burning, and the Hidden Stories

Just like the concept of “raise,” there is another concept of “burn.” You don’t often hear founder stories of “burn less, not more.” Another common-sense story that has stuck with me is this: it’s so easy to raise a lot, burn a lot, and show revenue. There are very few stories of micro teams, slow burns, and sustainable growth.

Post-Sustainability: Scaling Up

This all brings us to scale strategy. Post-sustainability, businesses are expected to scale. And a lot of scalable strategy, again, is about solving the puzzle of product, business, and self. There is no one better prepared than a founder to figure out the why, where, and how of resolving bottlenecks.

Many times, scalability is stuck because of the founder’s mindset. He is too technical. He has not simplified the complexity. It’s really like a maze—like a rat, you have to go through it enough times to know which paths not to take. This is why taking less, stretching pennies, and making mistakes with less money is more important than taking a lot of money, doing everything wrong the first time around, and not having enough left to go through mistakes or pivot quickly enough. Businesses also fail because of too much pivoting. I don’t think it’s the pivoting that fails; it’s the puzzle of product, business, and self.

Facing Narratives and Industry Expectations

Odds are always stacked against a founder. Narratives and industry expectations are a huge pressure for a novice. I was once told, “Mukul [now that you have raised your round] you are like a girl who everyone wants to date.” I did not know how to respond as a new founder. Having gone almost a year through due diligence and the evolution of product, business, and self, the concept of entrepreneurship—hustle married to dating—was too much for me to comprehend. I understand it now. I understand why the perception haunts the industry and why Venture has such a high failure rate when it comes to startups, all because it itself is stuck in the product, business, and self complexity.

The strategy of only raising money is never a strategy if you don’t know why you are raising it—whether to keep the ship running or take your dog for a haircut. (You could write a book on how founders splurge once they raise money.) This is why venture capital doesn’t want the founder to die, especially after they raise money. “Mukul please don’t die.” A venture that has figured out the puzzle would be increasing its chances of success.

Strategy as an Evolving Entity

Strategy is like an evolving entity. Only an obsession with product can create a business with value, which would be incomplete without a mature founder determined to solve an unsolved problem—in my case, a deep tech problem of the future. Now I hear people and friends telling me, “Mukul, what you told us 10 years back is what is happening now.” It’s great validation for the street, but I could not have lived to hear this and cherish it if I had not worked on myself. As I mentioned before, working on yourself is a relentless process. You can’t stop.

Another venture once told me, “Mukul, I don’t invest in businesses where the founder can’t sell himself and cross a few million in ARR.” It took me years to simplify my technical thinking, to be able to tell the simple story and transform into a salesperson. Strategy is also about having generalist skills. If, as a founder, you are not capable of wearing many hats, you are strategically handicapped.

Strategic Vision and Longevity

Building a business that lasts beyond yourself also needs vision. This is where you enter the realm of strategic vision. Very few businesses can last 100 years. And when they do, they are either already decaying and stagnant or taken over by new players. Giving an organization a strategic vision is not a concept that you might easily come across in the Harvard Business Review. You find strategic vision when you work on it as a scientist. It’s when you read, research, and debate in your head that you can understand why, when quantum has come and gone, condensational physics will still be there; and why, when AGI has come and gone, complexity will still be there.

Strategic vision can build organizations that can last beyond a lifetime, or even multiple lifetimes. And when that happens, you have not only changed the world, you have changed it for good—and you have indeed created impact. Because what’s of value is what lasts more than a few decades and beyond.

Continuing Strategic Challenges and Conclusion

Writing about this gave me some thinking space. My strategic challenges are far from over. When you build deep tech for the long haul, you need to also think about early stakeholders who want out. You need a revenue strategy, you need a valuation strategy, you need an exit strategy. Well, these are good problems to have because you are alive and still in the game—a game that could not have happened without strategic thinking. And once you survive and do not die, a billion-dollar valuation is eventually another milestone strategic startups can cross. When they do, they should laugh about all the laughter they once evoked when they believed and expressed that they were going to change the world and solve the unsolvable.