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.

The Problem Interview

Case Study of Product, Market, and Customer Validation

As you start out on a new venture, whether it be a product or service you seek to sell, it is crucial to understand your customer's point of view before coming up with a solution. Many entrepreneurs fail because they start out with a solution prior to defining a problem. This ultimately leads to a product which no one wants to use.

One of the ventures I have co-founded is to disrupt the higher education space. Here are some thinks we considered during the problem interview:

Product Risk: What is the problem/frustration? What are the top 3 problems?

Market Risk: Who is the compettion? How do customers solve the problem today?

Customer Risk: Who owns the pain/frustration?

My co-founder and I identified a group of 10 customers from three segments and conducted a face to face group interview/discussion. Here is the script we followed...

Welcome:
Thanks customers for participation. Begin telling them the about your product and the problem as you understand it, and see if it resonates with them.

Customer Segments:
How old are you?
Do you take courses online?
etc...

Tell Your Story:
Tell a story which includes use case about the problem/frustration you are going to solve. Does this resonate with you?

Problem Ranking:
Prioritize problems from customers point of view. This will help focus your efforts during product development by working on the most desired features first.

Explore Customers Views:
No script is needed for this. A heart to heart talk about how big of a problem is this and what the customers are currently doing about it. Understand the workflow from cradle to grave. Clearly identify 'must-have', 'nice-to-have' or 'don't-need'.

Wrap Up:
Thank customers for their participation and follow up with demo.

Document Results:
I would recommend having someone document your results. This is very important as you will likely forget some comments which can be extremely valuable in the future, especially if you pivot.

Ash Muarya has a book titled "Running Lean" which talks about this in further. Ash was the former CTO and friends with my Entrepreneurial Operations professor Kyle Murphy. Kyle has taught me critical skills about operations & execution of newly created ventures.