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How to Get all the Funding you require to get your product to market. What is a small Business Entrepreneur?. Entrepreneur n. a business man or woman of positive disposition who attempts to make profit from opportunities by risk, initiative and guidance from 2-small-business.com.
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How to Get all the Fundingyou require to get your product to market
What is a small Business Entrepreneur? • Entrepreneur n. a business man or woman of positive disposition who attempts to make profit from opportunities by risk, initiative and guidance from 2-small-business.com
Defining Your Product or Service and Its Markets • Focus on a problem you have personal experience with – make sure that it is a “top three” customer worry • Avoid technology wanderlust – “if you build it, they will not come” • Look for market dislocations where new leadership can emerge
Defining Your product or Service and Its Markets • Attack large and growing markets (>$1Bn) • Timing is critical – avoid: • Markets that are hyped – usually too late • Markets that are out of public favor (e.g. B2C) • Make sure that you have first mover advantage – thoroughly and creatively research the competition • Focus, focus, focus …. Differentiate, differentiate, differentiate ….
Building Your Team • Be honest/open about team’s holes internally and with financiers • Hire A+ team members – wait for right people – make sure you feel that you have the best CEO possible • Look for a mix of skills and backgrounds: • Combination of vision vs. operating skills – “mystic” vs. “mundane” • Startup vs. domain expertise • Mix of former companies
Building Your Team (Contd). • Focus early on engineering and sales/business development – mid-level talent OK if senior team profiles unclear • Everyone should know how to sell • Involve investors in key hiring decisions (e.g. V.P.s) • Spread ownership fairly • Avoid nepotism
Creating Leverage Through Partnerships • Business development more critical now than ever – sales leverage, time to market, etc. • Better to create a large footprint than extract every last penny from a relationship • Timing of discussion is important for credibility and lack of competitive repercussions
Creating Leverage Through Partnerships (Contd.) • Make sure partnerships are breakeven within a year • Partnerships come in all forms (e.g. attorneys, accountants, PR firms, search firms, contractors, etc.) – focus on leaders • Use partnerships to create barriers to entry
Developing Your Product/Service • Time to market is important – develop a demo/prototype quickly • Limit yourself to 12 months to revenue • Create frequent small product improvements – iteration better than “mega-releases” • Work with prospects/customers from the earliest possible point
Developing Your Product/Service • Buy rather than build at all costs • Create a “whatever it takes” culture – deliver on time • Always have a contingency plan
Keeping Customers in Mind • Create a customer-oriented culture - make sure everyone has customer contact • Develop a reference list as early as possible – focus on credible industry/sector leaders • Set customer expectations on deliverables appropriately • Make sure early users are ecstatic about product/service – support them feverishly
Managing Cash • Obsessively manage your burn rate • Use part-time CFO if needed • Understand when to adjust spending • Advertising • Headcount • Initiate new investor discussions at least four months before running out of cash
Developing a Good Reporting Structure • Publicly report status on key metrics internally (e.g. customers, pipeline, site traffic, development milestones, etc.) • Don’t fear investing in a good CFO – CFOs are needed earlier now than they were in the past • Plan on monthly Board meetings for first 6-12 months • Control the agenda • Give management team members exposure/participation • Focus on one major strategic issue at the end of each meeting
Developing a Good Reporting Structure (Contd.) • Communicate regularly between meetings with the Board and investor group (e.g. bi-monthly e-mails, breakfasts, etc.)
Financing Tips • Early, raise only as much as you need to get to a major milestone (e.g. beta product, site launch, etc.) • Later, raise as much as you can get/tolerate – helps brand company, displace competition, etc. • Develop financing plan around sales/product/team milestones • When choosing financing partners, marry for “love” not money • Use financing process as a proxy for working relationship
Financing Tips (Contd.) • Tips on getting in the door and presenting • Research the firm/partner • Come in via referral • Deliver overall concept in first three minutes • Be in sell mode and create excitement (concise, hard-hitting) – avoid “fireside chats” • Ten page summary and slides sufficient – provide complete CVs • Provide real-world examples – “virtual markets equals virtual $” • Plan on one hour
Business Angel vs. Venture Capital • Angels • Pros • Usually provide up to $50K-$250Kin early financing • Are usually quick decision makers • Are less valuation sensitive • Typically allow the entrepreneur to be more independent • Cons • Can create valuation dilemmas (e.g. down rounds later) • Can be cumbersome to manage/administer • Offer very limited operational expertise/contacts • May drop out of later rounds
Business Angel vs. Venture Capital • Venture Capital • Pros • Offer great expertise/contacts • Help generate credibility/exposure for company • Leverage efforts to secure future rounds of capital • Cons • Are tougher on valuation/terms • Scrutinize management performance more closely
Taking Advantage of Directors and Advisors • Treat them as extensions to management team – CEO’s responsibility to manage them • Look for complementary skills and expertise • VCs • Are a mile wide and an inch deep • Help in high level strategy and positioning – understand competitive landscape • Have experience with common operational challenges • Offer great contacts – business development, management team building • Can help guide financings
Taking Advantage of Directors and Advisors • Outside Directors • Add credibility if they are industry luminaries • Help with market/operational expertise • Create a balanced BoD – avoid single investor representative
The Five D’s • Define the market to your advantage • Develop a great team • Declare yourself the victor • Deliver the product/service on time • Defend your customer relationships viciously
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