SECRETS OF SUCCESSFUL STARTUPS

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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

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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

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10 Principles of the new economy

• Matter
• Space
• Time
• People
• Growth

• Value
• Efficiency
• Markets
• Transitions
• Impulse

• Recognize new business opportunities!

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To remember when starting a business (1/2)

• Pain is a continuum from minor inconvenience to
  life threatening.
• One persons pain can be another persons
  pleasure.
• There is a difference between buying a cool
  product and the one that gets rid of some pain.
• Pain depends on the circumstances.

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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 OLeary)

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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?

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Economics of running the business

• Will people pay enough so the business will make
  a profit?
• What will it offer that competitors dont?
• What will it offer that customers cant get
  elsewhere?
• Who do you want your customers to be?
• What are their buying habits?
• What do they want and need?

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Eight business models for the Internet

• Merchandise Sales
• Per Use
• Timed Usage
• Subscription
• Advertising
• Sponsorship
• Public Support
• Information Site

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Product design guidelines

• Design from outside in.
• Create an intuitive product.
• Get physical fast.
• Design for manufacturability.
• Surprise the user.
• Avoid product delays.

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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?

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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

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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

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Differences between Angels and VCs
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Angel investor Charlie Gaylord

• Things he looks for
• A defined market of at least 50M
• A real business, not just a product
• A potentially rewarding exit X10 return in 3-5
  yrs
• A team that can execute well
• Questions he asks about
• The business model and the market
• The operating plan
• Management
• Funding and its source

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Finding VCs

• The market
• Its 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

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Things to consider with possible venture
opportunities

• venture concept
• Market opportunity
• Technology
• Protection
• Manufacturing
• Marketing
• Management
• Resource
• Expected pay-off

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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

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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

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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

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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 Morses rules for success
• Make the decision that makes the most money
• Dont give your customer any excuse to say no
• If youre very smart and work hard, you can do
  one thing well (focus on your core competence)

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Niel Senturias ten commandments

• The golden rule is that the guy with the gold
  rules.
• Be aggressive but dont 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 cant see the
  power of your opponents move, there probably
  isnt any.
• Outhustle the other guy.
• Try to develop with threats, but dont threaten
  pointlessly.
• When you cant 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.

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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

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9 ways to kill a startup through bad PR -by Tom
Gable

• Pandoras Positioning
• Babel Branding
• Budget 22
• Egomaniac Expectations
• Creative Quagmires
• Missing Metrics
• Hysteria Marketing
• Dullness
• Old Economy Thinking

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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

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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

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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

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When starting up a new business watch out for

• Product development delays
• People problems
• Sales below projections
• New competitors
• Investor agendas

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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

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Growing the business fast (1/2) -by Leo
Speigel

• 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.

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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.

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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

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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