Start Ups The New Reality.Score

“Startups Fail from a Lack of Customers

not Product Development Failure”

Start-ups have to have a process to develop

customers in parallel with product development

processes.

Focus on Customers and Markets from Day One!

Mind2Net, Inc. © 2011 all rights reserved

Steven Blank 2008

The new start-up funding reality is you have to show

TRACTION

TRACTION = SALES Revenue = INVESTOR interest = get the MONEY

Everybody has a product/service idea but

most entrepreneurs focus on developing the

product/service thinking “if we build it they

will come” – NOT!



What Early Stage Investors Are Asking?

• Are you going to:

– Blow my initial investment?

– Or are you going to make me a ton of money?

• Are there customers?

– How many? Now? Later?

• Is there a profitable business model?

– Can it scale?


Startup Checklist

• Opportunity Where does the idea come from?

• Innovation Where is the innovation?

• Customer Who is the User/Payer?

• Competition Who is the competitor/complementor?

• Sales What is the Channel to reach the customer?

• Marketing: How do you create end user demand?

• What does Biz Dev do? Deals? Partnerships? Sales?

• Business/Revenue Model(s) How do we organize to make money?

• IP/Patents Regulatory Issues? How and how long?

• Time to Market How long does it take to get to market?

• Product Development Model How to you engineer it?

• Manufacturing What does it take to build it?

• Seed Financing How much? When?

• Follow-on Financing How much? When?

• Liquidity How much? When?


Step 1

Is there an articulated customer need?

How do you know?

How big a market and when?

Are others trying to solve it? If so, why you?

Does it solve an existing customer problem?

Do you have a sales roadmap?

Org chart? Influence map?

Do you understand the sales cycle?

ASP, LTV, ROI, etc.

Do you have a set of orders ($’s) validating the roadmap?

Does the financial model make sense?


Step 2


Customer Development Cycle

Concept/Bus. Plan

Product Dev. Alpha/Beta Test

Launch/1st Ship

Product Development Cycle

CustomerDiscovery

Validation CustomerNeed

Validated TractionTractionTraction

CompanyBuilding

$$$$

CompanyBuilding

$$$$Building

Feedback

Feedback

Yes I’ll buy this


Step 3Parallel Development Tracks

“chasm”

Know Your Customer - Questions

What are your customers top problems?

Does your product concept solve them?

Do customers agree?

How much will they pay?

Draw a day-in-the-life of a customer before & after

your product

Draw the org chart of users & buyers



Step 4

Increasing population of

affluent singles over 40

Increasing population of

affluent singles over 40

• Until you “cross the chasm” and validate market need.

• Traction comes after proof of sales.• It is a strategy not a tactic.• Define the market landscape to represent reality.• Emphasis is on learning & discovery before

execution (or it could be your execution).

Step 5


Iterate

It’s hard work and usually you need outside help

Step 6Where to get help?

• Put an ad out for the talent you need to succeed -Offer equity

• There are many organizations with talent that you can tap for free (Crunch Base, Score, SBA, Start-uppers, FB, LinkedIn, search)

• Use online tools• Enlist a family members help• Crowd Source


Step 7 Funding

• Develop your Pitch Deck

• Summary with Ask, Market potential, Product Niche, Scale, …

• 8-10 other slides – market forces, customer need, product description, sales strategy, scale strategy, financials – 3 yrs proforma, exit strategy, team, supplemental slides (make it visual)

• Make a video Pitch

• Post/Pitch to Angellist, Keiretsu, Y-combinator, Crowd Funding, Golden Seeds, Fund Me, Band of Angels, Norcal Angels, Institutional investors, Private Placements, get out here…

• Practice, Practice – Make a compelling business case

• Traction will attract investment


Step 8 Due Diligence Binder

Be prepared – Put this together early – Accelerate the Funding Process

Due Diligence Binder Table of ContentsExecutive Summary• Business presentation• Product/Brand definition• Monetization Model• Management team bios• Ownership structure – CAP sheet• 2nd deck and process overview slides

Financials • 3Year P&L summary, scaling, ROI, 3yr P&L worst case, and cap table• 2011 financials• 2012 financials• 2013 financials• 3 Year cash flow summary, worst case and expansion cost summaries

Market Research• Who is our customer?• Current market penetration and engagement summary• Competitive analysis• SWOT –TOWS analysis• Competitive landscape – Scatter diagram• Focus group research• Brand• Beta test interview notes• Partners• News articles

Marketing PlanAdvertising PlanBusiness Operations Processes• Sales and engagement overview• Contract and payment terms• Business process flows• Expansion plan overview• Position descriptions and training overview• IP product application(s)• IP algorithm• Network architecture• Contingency planning• IP management and protection• Legal representation and trademark• Data Privacy Policy

Human Resources• Hiring profiles and policies• Compensation structure• Incentive Comp. structure• Benefits • Policies & procedures• Code of conduct• Records Privacy Policy

Investor Relations


• Is your team right for the stage of company?

• Does sales growth plan match market?

• Who/How will drive innovation?

• Does burn rate match revenue model?

• Have we built a mission-oriented culture?

• Can we own the market or are we threatened by stiff competition?

• Are we listening to our customers?

• Does the board agree?

Company BuildingStep 9



From stealth start-ups to cloud commerce to

going businesses - East Bay Score’s

experienced counselors can add value in

Starting

Running

Growing

Your Business.

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Start Ups The New Reality.Score

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