Transcript Roadmap for the Start

Roadmap for the Start-Up Company
Pete Higgins
Partner
Second Avenue Partners
GETTING STARTED
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People
Idea
Plan
$$
Turn idea into product
Manage evolution
Building a Team
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Smart, complementary skills
Meeting around the kitchen table
Domain expertise
Investors are wary of non-business types
Industry is different than University life
Product development very different than
research
Hire in Context
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Right person, wrong time
Right kind of skills and experience
Strategist vs. scrappy
Big company vs. little company
Personality or Culture Fit
PROCESS STUFF
• Space
• Legal
• Getting organized
Legal Stuff
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Referrals
Interview for personality fit
Plain vanilla is always better
Simple, simple, simple
IP important, but not panacea
Business Plan—Think Like an Investor
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What’s the problem?
What is solution?
Will customers really care?
Who is competition? Narrow vs. Broad
Why win?
Why should I believe these guys?
Gross characteristics of financial forecast
What is dream?
Depth of Critical Thought
• Basic rules of business
– # of competitors
– Depth of value-add
– What are customer options?
• Know relevant models
– What are competitive models?
– What are historical models?
– Why have predecessor technologies failed?
• Know your own model
– What are you betting on?
– How soon does it have to work?
– What’s important to your success?
• Business plan is test of the people
Realism
“When a great executive meets up with a bad
business, it is usually the business whose
reputation remains intact.”
- Warren Buffett
Realism
• Hockey sticks are extremely rare outside the
NHL
• Even if market is hockey stick, why are you?
• It always takes longer and costs more
• Plan for reality; be prepared to react to the
dream
• Know what you are betting on
Raising Money
• Angels, Friends, and Family
• Govt grants of various kinds
• Venture Capital
– Many different flavors and tastes
• Tradeoff between dilution and time
• How much do you need to get to
the next milestone?
Where Do Ideas Come From?
• Lab--Modumetal
• “There must be a better way”—
Housevalues
• Previous job-Azaleos
• Enabling technology—Insitu
• Enabling legislation
• Enabling world events—Insitu
From R&D To Product
• Different discipline; often different teams
• Products evolve; but need to be “done” at
different points in time
• “Better is the enemy of Good Enough”
• Completeness; providing real solution
• Customer feedback loop is critical
• V1, V2, V3
Get to Market Early
• Get revenue, “traction”, start selling
• Customer satisfaction more important that
product and technology
• Build customer relationships and customer
feedback loop
• Make mistakes early and cheaply
Low Hanging Fruit
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Who can make a decision?
High value, low risk
Big budget, already approved
History of trying new stuff
Other hurdles—Regulation, compatibility,
etc.
Build domain expertise
• Focus on success of customer—every decision
should be weighed against this
• Listen to customers—Fine line between vision
and passion, and being stubborn
• All startups are in the service business
• More things liable to change than stay constant
• Everyone sells
• Be the voice of the customer
Falling in Love with First Plan
• Product is “done”; it’s just a sales/market
problem
• “Great technology”
– Customer don’t care; problem doesn’t exist
– Too complicated
– Who’s the customer?
• Agility is critical
Sell the Vision, Plan to Struggle
• 2X Rule: Everything takes twice as long and
costs twice as much
• Sales learning curve
• Be realistic about valuation milestones
• Raise more money; relax about valuation
Focus
• Rare to fail due to excessive focus
• Companies pulled in many directions
– Lots of unexplored potential
– Lots of ideas; many of them bad
– Well-meaning board members
• Conventional wisdom is frequently
inappropriate
• Focus on core value-add to highest priority
customers, then expand
Getting Ahead of Yourself
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Do not confuse activity with revenue
– Brother in law sales
– Great meetings
– Pipeline Value
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Jerry Maguire
What would you do if you were the
customer?
Invest FOLLOWING growth
Be Cheap
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Good intentions…but it is a slippery slope
It isn’t supposed to be comfortable
What culture do you want to establish?
It is okay to be small for awhile
What do you really need?
Minimum now vs. cash crunch
Growth and progress are not linear
Memo from the Last Downturn
• You don’t realize how fast things spin out of
control. There are self-reinforcing negative
affects in a downturn.
• Don’t spend money until you have to
• Don’t move out of your office until you are sitting
on top of one another
• Don’t hire any incremental employee until you just
can’t stand it
• Don’t get more capacity in your data center until
your site is going down
Memo from the Last Downturn
• Better to be “late to the party” than to be early
and run out of money
• Line item review of the budget every month
(everything)
• Not just a CEO mindset, but a company mindset
– Everyone must buy into the process
– But in a calm way—not run for the hills
• Create 2 or 3 different burn scenarios—know at
any point in time how many months of cash is left
Invest in Culture Early
• Values are easier to establish than change
• Frugality, integrity, customer orientation,
accountability, focus
• Invest in “team” values: balance, support,
communication, shared values, collaborative,
flexible job descriptions
• Consistent values + clear priorities simplifies
management
Manage the Company, Even When It is Small
• Don’t assume everyone knows
• Communicate goals and objectives
– Share successes and failures
– Enroll people; Encourage debate
• Communicate often; clearly; think about it
– Think about cultural icons
Don’t Treat Board Like IRS
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Enroll them in your mission; engage them in
reality
Arms length relationship leads to wariness
Communication is frequent and informal
Good news and bad news
If frequent, they can be trained to handle
Do the worrying for them
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Thinking about right goals and problems?
Right process? People?
Right solution?
Can I be helpful?
Team Evolution
• Overly Broad to specialist
• Generalists may not have specialist
skills
• Not everyone is right for the next stage
• V2.0 team vs. V1.0 Team
Knowing What You are Good At
Or, Why “Founder” Becomes a Dirty Word
• Focus on your strengths
• Aggressively complement yourself
• Focus outward--make everyone else
successful
• Ongoing conversation about yourself
Knowing What You are Good At
Or, Why “Founder” Becomes a Dirty Word
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Fixated on first vision
Personal agenda—it’s not your company
Over-rating your own capabilities
Failure to delegate and micromanage
Statistically, you’re eventually the wrong
person
• You don’t know if you even want the job
Leadership
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Domain experience and customer advocacy
Recruits great people
Manageable ego
Thoughtful about the business
Thoughtful about company culture, and
management
“It’s An Execution Play”
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All businesses are execution plays
Not about patents and secret sauce
Not about being first
First strategy is probably wrong
Winners, especially today, are those who
execute the best, and often changed strategy
the best
• Winners are never satisfied
Building Great Companies
• Business is a journey of unknown duration and
course
• It takes a fundamentally strong business idea
• More importantly, a talented team that has
thought about and built what it takes to win