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STARTUPSCORECARD
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Diligent Neg
S u c c e s s
F a i l u r e
IS HARD WORK THE ANSWER?
Hard work alone is NOT a reliable
predictor of success. Hard working
people sometimes fail and negligent
people sometimes succeed.
PROBLEM STATEMENT
Conventional Wisdom
NOT ENTIRELY
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!
Working hard is analogous to throwing a ball hard. The velocity is an import
reaching the target, but you cannot ignore other interactive forces like gravit
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What Is the Whole Story?PROBLEM STATEMENT
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STARTUP STRATEGY
The 6 Market Dynamics
CAPTURING THE WHOLE STORY
THE 3 APPLIED TOOLS
We’ve identified 6 market dynamics
That are interactively defining the
Market opportunity at any time. The
conceptual framework is the basis of
the Startup Scorecard.
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Evaluate your startup idea
scorecard criteria and be mindful
described in each one. Give yours
and then an overall score, for
provides a structured approach t
opportunity and helps to impro
accounting for a full spectru
criteria and reducing blind spots.
Evaluatin
Startup Id
Startup Scorecard
Finance
• Low Capital Requirement
• Clear Profit Model
• Economies of Scale
Finance Score ______
Timing
• Recent Innovation Enabler
• Demand Already Established
• No Signs of Commoditization
Timing Score ______
Competition
• Clear Market Inefficiency
• Low Barriers to Entry
• Differentiable Position
Competition Score ______
Team
• Subject Matter Expertise
• Functional Competence
• Supplier Partnerships
Team Score ______
Product
• Customer Focused Solution
• Low Barriers to Adoption
• Clear Value Proposition
Product Score ______
Customer
• Unmet Need or Desire
• Right Size Market or Segment
• Reliable Customer Channels
Customer Score ______
Overall Score _______SmarterStartup.org
Title _____________________________________________________________________
A A
B- B+
D A-
B
Real Estate IDX Integrated CRM
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WHAT’S A GOOD CUSTOMER?
The ideal customer has an unmet need or
desire. The size of this market should
match your ability to compete and ability
to deliver justify solving the problem.
Validate you can control means of customer
acquisition along the way.
STARTUP HEURISTICS
Customer Criteria
UNMET NEED OR DEUnsatisfied Customer
RIGHT-SIZE MARKET ORNeed to Segment? Too
RELIABLE ACCESS TO CDiversified Channels? Ga
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FOCUS ON HELPING OTHERS
FOCUS ON CREATING VALUE
Mom was right! Focus on helping others and
everything else will fall into place. Find a need
or desire that is not yet sufficiently addressed,
where the customer is so passionate they’d
happily pay for a solution. This approach is
much more likely to create real value than
copying an existing solution.
CUSTOMER CRITERIA
Unmet Need or Desire
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WHAT’S A GOOD PRODUCT?
A good product will be a direct response to
a customer need or desire. If the value is
well articulated and the customer is
passionate about your new solution, the
reason to buy will be compelling. Consider
deterrents also – are their high switch costs
and is the solution easy to use and
understand?
STARTUP HEURISTICS
Product Criteria
CUSTOMER FOCUSED SOSolves Unmet Need or
LOW BARRIERS TO ADLow Switch Cost, Usa
CLEAR VALUE PROPOCompelling Reason t
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PRODUCT CRITERIA
Customer Focused Solution (bene
ADDRESS NEED OR DESIREFOCUS ON CLEAR GOAL
KEEP IT SIMPLE!DON’T AMBIGUATE THE VALUE
The purpose of your product is to create value by addressing a specific need or desire. Sta
Don’t ambiguate the value created with distracting features that aren’t aligned with
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Albert Einstein
Physicist, Professor
Any intelligent fool can make things bigger and more comp
touch of genius - and a lot of courage to move in the opposit
PRODUCT CRITERIA
Customer Focused Solution (bene
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PRODUCT CRITERIA
Low Barriers to Adoption (cost
LEARNING CURVEINVESTED TIME & NEW COSTS
FINANCIAL IMPACTPRIOR INVESTMENT & NEW COSTS
WORKFLOW INTEGRATIONDOES IT EASILY INTEGRATE?
Even if you create new value, customers may hesitate to adopt your product if they’ve al
too much in an existing solution that is good enough, or if adopting your solution is to
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Ea
A(
Existing Inv estments
Lear ning Cur v e
IS THE VALUE CLEAR?
VALUE = BENEFIT - COST
PRODUCT CRITERIA
Clear Value Proposition (valu
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TheodoreLevitt
People don’t want quarter-
inch drills. They want
quarter-inch holes.7+'%
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WHAT IS GOOD TIMING?
Every market has a natural lifecycle
driven by innovation and circumstance.
Look for new demand or interest in
something that wasn’t possible just a
couple years ago. Be a “fast follower”
into a validated emerging market rather
than speculating on new opportunity.
STARTUP HEURISTICS
Timing Criteria
RECENT INNOVATION EWas it Possible 2-5 Yea
DEMAND ALREADY ESTBuild It & They Might N
NO SIGNS OF COMMODIShrinking Margins. More
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Every market has a natural lifecycle driven by innovation and circumstance. Look for s
wasn’t possible just a couple years ago & ramp up before the market capitulates (supp
TIMING CRITERIA
Innovation Life Cycle
Innovators
(2.5 %)
Early adopters
(13.5 %)
Early majority
(34 %)
Laggards
(16 %)
Late majority
(34 %)
The Golden Era #$% &'(%%)%
ConsolidatiEarly Movers
Capitulation
I
Innovation Adoption Curve
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Opportunity to enter diminishes as the market matures. Geoff Moore suggests en
chasm” after demand is validated but still early enough to ramp before the market capi
TIMING CRITERIA
Innovation Life Cycle
Innovators
(2.5 %)
Early adopters
(13.5 %)
Early majority
(34 %)
Laggards
(16 %)
Late majority
(34 %)
C h a s m
Innovation Adoption Curve
Ideal point to
enter a market- Geoff Moore
N e w E n t r a n t O p p o r t u n i t y
C d T h l
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Nicholas Carr
Harvard Business Review, 2003
TIMING CRITERIA
Commoditization of Technolo
It is difficult to imagine a more perfect commodity than a byte
As information technology’s power and ubiquity have grow
strategic importance has diminished .
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$5,000,000
What cost $5 mill
12 years ago can
less than $5,00
observed that com
availability of mo
has radically redu
of developing a s
CommoTechn
Hosting Commoditized
Open Source Software
Cloud Services (SaaS/PaaS)
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As cost has fal
competitive b
Competitive posit
key strateg
technological ca
consumer Interne
do you cut thro
Commo
Comm
2000 2002 2004 2006 2008 2010 2012 2013
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Data From NetCraft 2013 Web Server Survey
JKC
C t t C t
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GOOD COMPETITIVE LANDSCAPE?
Avoid being marginalized by excessive
undifferentiated competition. That
drives margin compression, commodi-
tization and market consolidation. Look
for inefficient markets where there’s still
‘play’ and find ways to develop a
sustainable competitive advantage.
STARTUP HEURISTICS
Competition Criteria
CLEAR MARKET INEFFStagnant or Fragmented
LOW BARRIERS TO EEasy & Cheap to Com
DIFFERENTIABLE POSSomething Special or D
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L B i t E t
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Sun Tzu
War Strategist, Wrote The Art of War
The general who makes many calculations before battle is wisknows when he can fight and when he cannot will be victo
COMPETITION CRITERIA
Low Barriers to Entry
L B i t E t
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Avoid a fight you cannot win! A market can be much harder to enter if
competitor already has a mature offering that you must catch up to.
THINGS TO AVOID
• Existing Economies of Scale
•
Existing Mature Product (feature set)
• Well-Established Brand (halo)
• Price Competition
COMPETITION CRITERIA
Low Barriers to Entry
Diff ti bl P iti
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SEGMENTED MARKETFOCUS ON SPECIFIC CUSTOMER
LOW PRICE LEADERSHIPFOCUS ON VOLUME & COMMODITY
DIFFERENTIATED PRODUCTDISRUPTIVE OR INNOVATIVE
HOW ARE YOU DIFFE
WHAT MAKES YO
COMPETITION CRITERIA
Differentiable Position
In order to be a desirable signal that stands out against a background of noise, you n
compelling value to some customers that others do not. There are 3 viable positioning
Porter’s Generic Competitive Strategies
Fi i l C it i
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GOOD FINANCIAL PROFILE?
Look for opportunities to maximize
returns without excess capital risk.
Look for opportunities to start cheap
and to realize higher margins through
focused efforts and economies of scale.
Avoid locking up too much capital.
STARTUP HEURISTICS
Financial Criteria
LOW SUNK COSTUp Front Capital at R
WORKING CAPITAL FGap Between Payable/R
ECONOMIES OF SCMargins Increase With V
Lo S nk Costs
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How much up-front capital must you commit to
develop this product or business? Sunk capitalrepresents risk since you don’t know if you’ll get it
back, as well as opportunity cost since that money
could be committed to other opportunities.
FINANCIAL CRITERIA
Low Sunk Costs
HOW MUCH CAPITAL RISK?
OPPORTUNITY COST
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Some businesses r
outlay every month
take 3-4 months to
the business may nor credit to cover
months of operati
both a cost (inter
Work
Capita
DO YOU NEED A LINE OF CREDIT?
WHAT’S THE COST & RISK?
Accounts
Receivable
60 - 120 Day"Capital
Float"AccountsPayable
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Look for opportunities whe
increase with volume (scal
development, and distribut
diminish on a per-unit bas
in volume. As a result profi
competitive advantage bot
Economi
of Scale
Q u a n t i t y
Profits
Marginal Cost S c a l a b l
e P r o fi t s
Team Fit & Fitness Criteria
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WHAT’S GOOD TEAM FIT?
Just because an opportunity exists, doesn’t
mean your team is likely to succeed. Are
you fit to compete? Does your team have a
competitive advantage? Do you possess
deep knowledge, technical skills to deliver,
& access to key partners and resources?
STARTUP HEURISTICS
Team Fit & Fitness Criteria
SUBJECT MATTER EXPDeep Knowledge of M
FUNCTIONAL COMPETechnical Skills to D
SUPPLIER PARTNERSAccess to Materials at G
The Hacker & The Hustler
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TEAM-FIT CRITERIA
The Hacker & The Hustler
“The Hacker”
Technical skills to design
develop a well-crafted a
scalable solution.
“The Hustler”
Knowledge of customer or desire, and
understanding of market dynamics to
effectively position an offering.
A team needs deep subject matter expertise and technical skills to design a solution
succeed. It is difficult for a single person to be efficient at “heads up” and “heads do
The Functional ExpeSubject Matter Expert
Supplier Partnerships
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TEAM-FIT CRITERIA
Supplier Partnerships
Preferred Sourcing
Are you able to procure
supplies at competitive prices?
If affiliate mktg, can you get
preferred commissions?
Available Data APIs
Are you able to access the data
or integration APIs needed to
build your product?
Outsourc
If planning
physical produ
you have a q
can
Consider the dependencies you may have on external sources of materials, data, and
you have access to the necessary resources to deliver your product and to price com
St t S d
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Evaluate your startup idea
scorecard criteria and be mindful
described in each one. Give yours
and then an overall score, for provides a structured approach t
opportunity and helps to impro
accounting for a full spectru
criteria and reducing blind spots.
Evaluatin
Startup Id
Startup Scorecard
Finance
• Low Capital Requirement
• Clear Profit Model
• Economies of Scale
Finance Score ______
Timing
• Recent Innovation Enabler
• Demand Already Established
• No Signs of Commoditization
Timing Score ______
Competition
• Clear Market Inefficiency
• Low Barriers to Entry
• Differentiable Position
Competition Score ______
Team
• Subject Matter Expertise
• Functional Competence
• Supplier Partnerships
Team Score ______
Product
• Customer Focused Solution
• Low Barriers to Adoption
• Clear Value Proposition
Product Score ______
Customer
• Unmet Need or Desire
• Right Size Market or Segment
• Reliable Customer Channels
Customer Score ______
Overall Score _______SmarterStartup.org
Title _____________________________________________________________________
A A
B- B+
D A-
B
Real Estate IDX Integrated CRM
Identifying & Locating Opportu
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Identifying & Locating Opportu
Timing
Customer Product
CompetitionStartup
Opportunity
Finance Team
We cannot work simp
expect to have a des
There are many dyna
all determine whethe
succeed. Some ma
they are the excepti
STARTUP HEURISTICS
SmarterStartup org
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CONCLUSION
SmarterStartup.org
We have posted in-depth articles,
diagrams, and downloadable references
and worksheets on our website.
Everything is free to use, so check it out.
www.SmarterStartup.org