Does a Startup Have to be Disruptive to Succeed?
Mihir Gandhi
The history of the human race is littered with examples of disruptive innovation and the subsequent progress it initiated. It’s a key ingredient in the progress recipe, but the dish isn’t necessarily ruined if you leave it out.
Disruptive Technology
The term ‘disruptive technology’ was first used in 1995 in a published report by Harvard Business School professor Clayton Christensen. Christensen described ‘disruptive technology’ as a breakthrough that significantly changes at least one thing in a particular market. Later, however, Christensen changed his thinking, and modified the term to ‘disruptive innovation’. Technology itself isn’t necessarily disruptive, he said, but how businesses put it to use is.
Disruptive Innovation
True disruptive innovation is quite rare. Sustaining innovation is much more common, and it’s what 99 percent of all business activity is based upon. The advent of the Internet is an example of disruptive innovation. Minor improvements in model versions, such as the iPhone6 after the iPhone 5, are examples of sustaining innovation. Both are important.
How to Tell if Your Startup is Disruptive
The distinction between disruptive or non-disruptive is often subjective, and opinions vary depending on perspective. Here a few things to look for inside your own startup.
At least one competitor is unhappy: Your success will have a dramatic impact on theirs. They see you as a threat.
Your business model is brand new: You’ve figured out how to be at least ten times faster and cheaper. You are scalable enough to dramatically drive demand up and prices down.
Success Without Disruption
Now back to Christensen. Not to worry if you don’t see your startup as disruptive after all. There is a place for non-disruptive business too. Christensen says that many companies innovate more quickly than customer needs actually evolve, and they end up with an offering too complex, to costly, and too advanced for the current market.
Sure, some investors out there are only looking for “that next big thing”, but others will value the sustaining innovation approach as a slightly less risky investment with a slightly higher potential of return. In some cases, you may just attract more investment with this non-disruptive approach.
When you’re ready to bring investors on board, let VerifyInvestor.com help you abide by federal laws that make it mandatory to verify your investors are accredited.
Updated 7/21/2022
Whether you are disrupting an old industry or going with the flow of an established industry, gathering investors can sometimes be harder than herding cats. Additionally, tip-toeing around solicitation regulations can be cumbersome and inefficient. Luckily, the JOBS Act exists, permitting your private company to seek investors publicly through Rule 506(c). Do not forget that this requires each of those investors to be accredited investors by the time money starts getting exchanged.
We always recommend consulting with your counsel before proceeding with any fundraising-related regulation. However, if you do decide to go with Rule 506(c) and need verification of accredited investors, we offer an efficient and affordable service for issuers and their investors to obtain a fully compliant attorney-signed accredited investor letter.