Post on 26-Dec-2015
What is a small Business Entrepreneur?
Entrepreneur n. a business man
or woman of positive disposition who
attempts to make profit from opportunities
by risk, initiative and guidance from
2-small-business.com
Defining Your Product or Service and Its Markets
Focus on a problem you have personal experience with – make sure that it is a “top three” customer worry
Avoid technology wanderlust – “if you build it, they will not come”
Look for market dislocations where new leadership can emerge
Defining Your product or Service and Its Markets
Attack large and growing markets (>$1Bn) Timing is critical – avoid:
– Markets that are hyped – usually too late– Markets that are out of public favor (e.g. B2C)
Make sure that you have first mover advantage – thoroughly and creatively research the competition
Focus, focus, focus …. Differentiate, differentiate, differentiate ….
Building Your Team
Be honest/open about team’s holes internally and with financiers
Hire A+ team members – wait for right people – make sure you feel that you have the best CEO possible
Look for a mix of skills and backgrounds:– Combination of vision vs. operating skills – “mystic” vs.
“mundane”– Startup vs. domain expertise– Mix of former companies
Building Your Team (Contd).
Focus early on engineering and sales/business development – mid-level talent OK if senior team profiles unclear
Everyone should know how to sell Involve investors in key hiring decisions (e.g. V.P.s) Spread ownership fairly Avoid nepotism
Creating Leverage Through Partnerships
Business development more critical now than ever – sales leverage, time to market, etc.
Better to create a large footprint than extract every last penny from a relationship
Timing of discussion is important for credibility and lack of competitive repercussions
Creating Leverage Through Partnerships (Contd.)
Make sure partnerships are breakeven within a year
Partnerships come in all forms (e.g. attorneys, accountants, PR firms, search firms, contractors, etc.) – focus on leaders
Use partnerships to create barriers to entry
Developing Your Product/Service
Time to market is important – develop a demo/prototype quickly
Limit yourself to 12 months to revenue Create frequent small product improvements
– iteration better than “mega-releases” Work with prospects/customers from the
earliest possible point
Developing Your Product/Service
Buy rather than build at all costs
Create a “whatever it takes” culture – deliver on time
Always have a contingency plan
Keeping Customers in Mind
Create a customer-oriented culture - make sure everyone has customer contact
Develop a reference list as early as possible – focus on credible industry/sector leaders
Set customer expectations on deliverables appropriately
Make sure early users are ecstatic about product/service – support them feverishly
Managing Cash
Obsessively manage your burn rate Use part-time CFO if needed Understand when to adjust spending
– Advertising– Headcount
Initiate new investor discussions at least four months before running out of cash
Developing a Good Reporting Structure
Publicly report status on key metrics internally (e.g. customers, pipeline, site traffic, development milestones, etc.)
Don’t fear investing in a good CFO – CFOs are needed earlier now than they were in the past
Plan on monthly Board meetings for first 6-12 months– Control the agenda– Give management team members
exposure/participation– Focus on one major strategic issue at the end of
each meeting
Developing a Good Reporting Structure (Contd.)
• Communicate regularly between meetings with the Board and investor group (e.g. bi-monthly e-mails, breakfasts, etc.)
Financing Tips
Early, raise only as much as you need to get to a major milestone (e.g. beta product, site launch, etc.)
Later, raise as much as you can get/tolerate – helps brand company, displace competition, etc.
Develop financing plan around sales/product/team milestones
When choosing financing partners, marry for “love” not money
Use financing process as a proxy for working relationship
Financing Tips (Contd.)
Tips on getting in the door and presenting– Research the firm/partner– Come in via referral– Deliver overall concept in first three minutes– Be in sell mode and create excitement (concise, hard-
hitting) – avoid “fireside chats”– Ten page summary and slides sufficient – provide
complete CVs– Provide real-world examples – “virtual markets equals
virtual $”– Plan on one hour
Business Angel vs. Venture Capital
Angels– Pros
Usually provide up to $50K-$250Kin early financing Are usually quick decision makers Are less valuation sensitive Typically allow the entrepreneur to be more independent
– Cons Can create valuation dilemmas (e.g. down rounds later) Can be cumbersome to manage/administer Offer very limited operational expertise/contacts May drop out of later rounds
Business Angel vs. Venture Capital
Venture Capital– Pros
Offer great expertise/contacts Help generate credibility/exposure for company Leverage efforts to secure future rounds of capital
– Cons Are tougher on valuation/terms Scrutinize management performance more closely
Taking Advantage of Directors and Advisors
Treat them as extensions to management team – CEO’s responsibility to manage them
Look for complementary skills and expertise VCs
– Are a mile wide and an inch deep– Help in high level strategy and positioning –
understand competitive landscape– Have experience with common operational challenges– Offer great contacts – business development,
management team building– Can help guide financings
Taking Advantage of Directors and Advisors
Outside Directors– Add credibility if they are industry luminaries– Help with market/operational expertise
Create a balanced BoD – avoid single investor representative
The Five D’s
Define the market to your advantage
Develop a great team
Declare yourself the victor
Deliver the product/service on time
Defend your customer relationships viciously