Three Survival Strategies for Young Companies (Plus a Stock Tip) from the Startup Predictor

5/19/10Follow @gthuang

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substance, he says, employing the right narrative arc can triple its valuation—whether it’s in capital markets (stocks), the IPO market, or startups.

“There is a narrative structure for startups,” Thurston says, but he wouldn’t share too many specifics. He did say the arc of the story should be like a classic hero’s journey in literature or Hollywood. I took this to mean it should have a protagonist, an inciting incident (or a call to adventure), a goal, antagonists, and successive challenges and conflicts.

Thurston also says that “about one-third of your pitch [should be] about the competitors.” Most entrepreneurs’ pitches show just one slide and marginalize their competition, he says.

“It pays to say, ‘There are competitors, and they’re better at what they do. But we’re doing something else.’ You’ve got to spend a lot of time on the truth, and no time on the spin,” he says. “Entrepreneurs think that if investors really understand the competitors, they’ll never invest. But the way it comes across to investors is they’re being shifty. I know, I’ve sat on both sides of the table.” (Note to startups: it might help to be more upfront with the media about your competitors as well. We at Xconomy always ask this question of companies, and often find them to be evasive.)

On a separate note, I asked Thurston about what specific fields he’s seeing a lot of interesting startups enter these days. He mentioned healthcare, software as a service, (“not every one is disruptive, but there’s huge potential there”), and “crowdsourcing” applications.

“I like to look at industries with really big incumbents, almost monopoly situations. Then you look down at the ground and see who might be disruptive,” he says. Take the airline industry. Small airlines operating out of second- or third-tier airports could disrupt the big airlines, he says.

Which brings us to his stock tip: check out Allegiant Travel (NASDAQ: ALGT), a company led by former ValuJet execs, which is trading at more than $50 a share.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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