New Venture Milestones

During the past 12 months in Business School @Graziadio, I've been involved with 3 different startups including EarlyX, Pepperdine.Us, and Get Ed on Budget. The most challenging part is not coming up with a a solution to a problem/frustration, but rather executing the idea to find a repeatable sales model.

Here are a list of milestones which are crucial steps during a new venture creation:

Identify problem or frustration you seek to solve. I've had a lot of success using Lean Canvas Model. Be clear about what business you're in, how you'll be making money, and how that ties to your goals.

Naturally, your venture will fit into one of the following:

Each quadrant offers it's own set of challenges and rewards.

Determine how big is the market size. I've found IBIS World to be an excellent source for a top-down market research (free for students). You will also want to perform a bottom-up market analysis which would meet your top-down projections of total, addressable, reachable and likely to buy market.

Develop the Concept / Prototype
Develop a prototype. Recent innovations in software have reduced the time and capital required to build a Minimum Viable Product. Determine whether to proceed with further development based on initial feasibility experiments. This is a low cost step relative to future product development investments. You should figure out whether a real market exists or fix flaws in your assumptions. Some questions to consider are:

• Is there an opportunity with sufficient up-side gain relative to necessary risks and costs?
• What has the test taught us which modifies our assumptions and product dev objectives and target markets?

Completion of a Prototype 

Obtain any useful information from carefully analyzing prototype development. Understand what caused road blocks, disappointments and how did you overcome them. Consider the following...

• What assumptions did you make about dev time, cost? How has that changed?
• How does your findings affect financial needs and timing?
• What did you learn about labor, material, equipment availability and cost? 
• How do your findings affect your pricing plans?
• Do your assumptions about 

Initial Financing

Businesses must compete in capital and product markets to survive. Securing financing is an opportunity to learn about venture's acceptable financial and expense structure. First round funding can be used to test concept's potential, finance product dev, or initiative sales. I've found financial pro forma projections to be one of the most challenging parts of new venture creation. Investors will look at this very closely, I suggest you get an experienced advisor to look at this before pitching it to investors. There are several templates you can find on the web for startup finance model.

Pilot Project

Pilot projects are a great way to challenge your assumptions and validate value from your customers point of view. Consider launching your product/service to a minimal audience as part of your pilot project. Observations from pilot projects can be used to improve performance and cost estimes. 

Product / Market Fit Testing

By far, one of the most common reasons why startups fail is because they build products which aren't used. What is your target market for your product? What is the desired set of characteristics/features of your product for this market? Some additional questions to answer:

• Have customers bought your product? Why or why not?
• Is it really different from competition?

Re-design or re-direction 

Use findings from pilot project and marketing testing to redesign or select a different target market. This is proportional to the differences between what your product offering is vs market need. Examine your basic assumptions concerning market size, segments, investment needs, pricing and financials.

Scale Up Production

After incorporating feedback from pilot project, production run test will reveal a new set of problems which need to be solved. Most important thing is to note true cost of producing a steady flow of product and meeting quality standards. The last thing you want is customer rejection as that will increase dissatisfaction and waste huge amounts of resources. 

First BIG Deal

This is the first sale to a major account. In B2C market, this could be a deal with a major distributor. In B2B world, this could be a sale to another major company. Some questions to ponder about:

• How does product compare to competitor in the real world?
• Continue or change initial selling method?
• Service layer agreements?
• What are quality control expectations?

Competition Reaction

How will competitors respond to your venture or product? Plan possible responses depending on what moves your competitors make. You want to know what your rivals competitive position is. I've found Mind Tools Strategy toolkit to be a very effective summary of 2 years of Business School.

Investor Pitch : Get Ed On Budget

I had a pitch infront of a few members from Tech Coast Angeles, BeachMint and a local early stage Venture Capital firm tonight.

Get Ed On Budget is a business model innovation helping students learn to earn. It accomplishes what most schools don't do today which is personalize the learning experience to match your goals by finding out who you are and where you're trying to go.

Here are some take aways and feedback about my pitch:

• Pitch as business owner, not as a consumer. At times, consumers and business owners have differing interests. For example, as a small business restuarant owner, you wouldn't want consumers to hang around after their meal, though consumers would.
• Be specific, show details. Pick a location, take a screenshot, any detail helps
• Show average consumer spending, before and after your product 
• Don't over promise the financials. If your financials look better than Google's, take another stab at it.
• Show a demo 
• It's amazing how many pitches end while investors are wondering..."What is it that you're selling"
  
  
• 50/50 is about right for revenue share deals. At first you need them more than they need you, then you use it as leverage
• Pick a niche market for validation and product/market fit
• Cost to build software is $
  
  
• Give 100% away initially to prove market validation
• Get 10 people to pay you to prove product 
• Don't use slang words, don't expect investors to keep up latest phrases. For instance, what is a MOOC?
• Consumers will compare your price with others, and if significantly cheaper, then they perceive your product to have lower quality. For instance, $11.99 vs $3000, consumers think you are sacrificing quality
• Focus on 1 thing and do it really well.
• Don’t undersell your experiences.
• Don’t ever lead with a negative, be confident about what you know.
• Cost of selling to retail is very high...gotta get 5x retail margin
• Consider sales cycle, how long is it? How long will you need to persuade them decision makers to purchase?