Transcript Document 7215566

SECRETS OF
SUCCESSFUL STARTUPS
Presentation of a paper prepared for the international
summer school in innovation and entrepreneurship, the
university of California, San Diego (July 10.-28. 2000)
Antti Aarnio & Soile Oikkonen
Contents
Driving principles of the new economy
Business models for the internet
Funding
Things to consider with possible venture
opportunities
Business plans
Best practises and pitfalls
10 Principles of the new economy
Matter
Space
Time
People
Growth
Value
Efficiency
Markets
Transitions
Impulse
- Recognize new business opportunities!
To remember when starting a
business (1/2)
Pain is a continuum from minor
inconvenience to life threatening.
One person’s pain can be another
person’s pleasure.
There is a difference between buying a
cool product and the one that gets rid
of some pain.
Pain depends on the circumstances.
To remember when starting a
business (2/2)
Great idea eliminates pain.
A new product lessens pain.
People need to relieve more pain than
they cause.
Products need to be developed
according to the demand of pain.
– (“What a Pain in the Ass!” by Chris O’Leary)
Understand your customer
What will the business be about?
What will its competitive advantage be?
What will it be especially good at?
How will this match its capabilities?
What will make the business successful?
Economics of running the
business
Will people pay enough so the business will
make a profit?
What will it offer that competitors don’t?
What will it offer that customers can’t get
elsewhere?
Who do you want your customers to be?
What are their buying habits?
What do they want and need?
Eight business models for the
Internet
1.
2.
3.
4.
5.
6.
7.
8.
“Merchandise Sales”
“Per Use”
“Timed Usage”
“Subscription”
“Advertising”
“Sponsorship”
“Public Support”
“Information Site”
Product design guidelines
Design from outside in.
Create an intuitive product.
Get physical fast.
Design for manufacturability.
Surprise the user.
Avoid product delays.
The key issues for investors
How will revenue be generated?
Is the business idea sustainable long
enaugh to generate a significant return
on investment?
Is the management team up to
challenge?
Finding funding (1/2)
“FFF money” = Family, Friends, Fools
Stages of funding
Concept stage:
• business plan and a model
• from personal savings, FFF, Angels
Early stage:
• Beta (product, customers); market defined
• Angels, some VCs
Finding funding (2/2)
First pro round:
• product and referenceable customers
• VCs and some Angels
Later stage rounds:
• first pro round + market validation
• VCs
NEVER RUN OUT OF MONEY!
• Always ask for more than you think
you are going to need
Differences between Angels and VCs
Angels
VCs
Reasons
more personal and
financial
financial, ROI
Sophistication
varied, no staff
high
Funds
usually shallow
usually deep, check fund
age
Follow-on
low $, low sophistication
yes, set-aside $ available
Use of $
discretionary
mandatory
Stage
usually earlier, but varied
focused
Patience
higher
lower, interested in ROI
Decisions
quicker/poorer
slower/more rational, but
act like penguins
Help
uneven, but some
mentors, general business
focus
opinionated, don’t always
have time, have contacts,
strategic relations, more $
Valuation
higher
lower, ROI
Angel investor Charlie Gaylord
Things he looks for:
•A
•A
•A
•A
defined market of at least $50M
real business, not just a product
potentially rewarding exit – X10 return in 3-5 yrs
team that can execute well
Questions he asks about:
• The business model and the market
• The operating plan
• Management
• Funding and its source
Finding VCs
The market
It’s a team game.
Focus
Have a great story
Will the dogs eat the dog food?
Referrals
Time is money
Realistic financial projections
Valuation
Exit strategy
Sales tool or operating plan
Things to consider with possible
venture opportunities
“venture concept”
Market opportunity
Technology
Protection
Manufacturing
Marketing
Management
Resource
Expected pay-off
Preparing a business plan
-by Ken Olsson
Plan outline
Prepare a summary
Edit the summary
Add an appendix
Define the market opportunity
Describe the team
How far along is the product?
Marketing strategy
Development and operation plans
Spending and results
Capitalization plan
Common problems with
business plans
Too long
• Should be under 30 pages, the shorter the better
Unclear concept
Customer input missing
Weak competition section
Too brief team description
Great venture team
Really smart people
People who can make a concept live and
breathe
People who are likely to wear well over time
Know the compelling interests of the
members
Not too much emphasis on credentials
Anticipate a leave from a member
Getting organized
Venture teams should come with a label that
says “some assembly required”
Never assume things are obvious
Clear goals known by everybody
Each team member should have a formal
accountability/performance agreement
Terry Morse’s rules for success
• Make the decision that makes the most money
• Don’t give your customer any excuse to say “no”
• If you’re very smart and work hard, you can do one thing
well (focus on your core competence)
Niel Senturia’s ten commandments
The golden rule is that the guy with the gold rules.
Be aggressive but don’t take unnecessary chances.
Answer all threats. Improve your position and pose a counter threat.
Play for initiative. If you have it, maintain it.
Cut your losses but lose as little as possible.
Rely on your own powers. If you can’t see the power of your
opponents move, there probably isn’t any.
Outhustle the other guy.
Try to develop with threats, but don’t threaten pointlessly.
When you can’t decide, accept.
Choose a plan and stay with it.
To gain time, usually you have to sacrifice.
Remember Einstein – time slows down as speed increases.
Branding the product
A promise to the customer
Brand equity
Brand loyalty
Have a marketing strategy
Tie the product to a single concept
Establish brand relevance
Have a brand esteem
Have a brand knowledge
Appropriate name for business helps
Logo that has a clear meaning
“9 ways to kill a startup through
bad PR” -by Tom Gable
Pandora’s Positioning
Babel Branding
Budget 22
Egomaniac Expectations
Creative Quagmires
Missing Metrics
Hysteria Marketing
Dullness
Old Economy Thinking
Marketing the product
Have a market that is wide enough but
not too big
Right time to enter
Getting customer attention
Collecting customer information
Planning the future
Packaging products
10 ways to attract new business (1/2)
Be an example
Be a solution provider
Have a good product knowledge and
presentation techniques
Collect your best stories
Improve your communication skills
10 ways to attract new business (2/2)
Add value to your customers
Get feedback from your customers
Get letters of recommendation from your best
customers
Act confidentially
Master the six-step selling process
• 1) Establish rapport, 2) ask questions to understand
customers real need, 3) determine where real value is, 4)
link customers need to the value to your product/service,
5) assume the sale and conditionally close – if green
light, close 6) if there are any objections, handle them by
cycling back to previous steps
When starting up a new business
watch out for:
Product development delays
People problems
Sales below projections
New competitors
Investor agendas
An entrepreneurial leader
Strong physically, mentally, emotionally,
spiritually
Get personal needs met
Tolerate nothing
Oriented exclusively around their values
Deliver twice what they promise
Affect others profoundly
Build a super-reserve in every area
Growing the business fast
-by Leo Speigel
(1/2)
Hire great people fast and executive
management early.
Be well funded.
Purposefully create a company culture
that values empowerment, delegation
and self-direction.
Make each employee a star.
Have great advisors.
Growing the business fast
(2/2)
Buzz is king.
Know your target market and watch all
your competitors
Find the boulders.
Work hard, have a “can do” attitude
and be passionate.
Focus on keeping a balance between
personal and private life.
Finding partners
Networking
Partnerships
Alliance with richer, smarter, larger and the
one that also benefits from it.
Marketing arrangements
Key objectives:
Good financial transactions
A value-adding partner
Win-win relationship
Learning from failure
Patterns of failure -by Geoffrey Moore in “Red
Herring”
The slow fail
Failure on transition into the mainstream market.
Managers and investors dive right in without niche
market
End up in the dead zone
Examples of services available for companies
in different countries
Help with issues “over Atlantic”
France, Finland, Ireland, Sweden, UK, Germany