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Roadmap for the Start-Up Company Pete Higgins Partner Second Avenue Partners.

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Presentation on theme: "Roadmap for the Start-Up Company Pete Higgins Partner Second Avenue Partners."— Presentation transcript:

1 Roadmap for the Start-Up Company Pete Higgins Partner Second Avenue Partners

2 GETTING STARTED People Idea Plan $$ Turn idea into product Manage evolution

3 Building a Team 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

4 Hire in Context Right person, wrong time Right kind of skills and experience Strategist vs. scrappy Big company vs. little company Personality or Culture Fit

5 PROCESS STUFF Space Legal Getting organized

6 Legal Stuff Referrals Interview for personality fit Plain vanilla is always better Simple, simple, simple IP important, but not panacea

7 Business Plan—Think Like an Investor 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?

8 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

9 Realism “When a great executive meets up with a bad business, it is usually the business whose reputation remains intact.” - Warren Buffett

10 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

11 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?

12 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

13 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

14 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

15 Low Hanging Fruit Who can make a decision? High value, low risk Big budget, already approved History of trying new stuff Other hurdles—Regulation, compatibility, etc.

16 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

17 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

18 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

19 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

20 Getting Ahead of Yourself Do not confuse activity with revenue – Brother in law sales – Great meetings – Pipeline Value Jerry Maguire What would you do if you were the customer? Invest FOLLOWING growth

21 Be Cheap 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

22 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

23 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

24 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

25 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

26 Don’t Treat Board Like IRS 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 – Thinking about right goals and problems? – Right process? People? – Right solution? – Can I be helpful?

27 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

28 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

29 Knowing What You are Good At Or, Why “Founder” Becomes a Dirty Word 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

30 Leadership Domain experience and customer advocacy Recruits great people Manageable ego Thoughtful about the business Thoughtful about company culture, and management

31 “It’s An Execution Play” 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

32 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

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