How to Build and Finance a Great Start up the coming 10 years(1)

There will be few articles to complete the subject.

The number of start ups succeeding in their objectives are only a small fraction ( less than 10 % ) . The main reason is that the most of the start ups do not have process to test faster their business model , competition is becoming global and the traditional product creation process offers no real feedback till working prototypes are available . With the acceleration of Innovation due to faster Digital Networks , 3D Computer Simulations , Exponentially growing new technologies( Cloud computing , Data Analytics , 3D printing , Smart Sensors , Mobile , Social networking ,… ) and proliferation of information the business environment became even faster and more competitive . The old product creation process starting with customer requirements followed from design and rigid implementation is not agile and is inadequate for the faster and faster changing market . The main issue is that the current process does not involve the customers and community early and iteratively enough although the tools available have never been better ( social networking , Blogging , on line communities and Platforms , You Tube , Kickstarter like Companies , tools for fast prototyping , 3rd party leverage ,..… ) .

In this article my focus will be for Start Ups with physical consumer products , focus on the crucial customer development process and the company has got seed / angel money to start operating till prototypes available There will be a few articles to complete the subject .

To be able to change the above mentioned old paradigm we need to adopt different thinking and mindset on how we build , run and finance start ups .For this the following principles are key :

  1. Define a company Purpose ( think big is vital in the 21st century as well as a purpose that resonates with the society )
  2. Plan a product or system/platform at least 10 X better than the status quo . A product / system easy to experience and/or frequently used .
  3. Start by targeting a small initial market segment and establish from day one a process of Interaction with the targeted early adopter customers and relevant on line communities that are vital for innovation .
  4. Match flexible interaction with customers/community with agile development process
  5. Failure is an integral part of the process
  6. Business plans are flexible and changing often. The focus is on Business model attributes especially finding as fast as possible a profitable and scalable go to market strategy among others.
  7. Design iterative experiments with prototypes and customers , community to validate various hypotheses as well as improve and expand the User Experience .
  8. Leverage as much as possible 3rd party assets . There are so many third parties to help with fast prototyping , web assets , networking ,…..
  9. The market type ( existing , new , niche ,.. ) is vital as it needs different approaches .
  10. In early stages the success metrics are not the traditional big company metrics ( revenue , gross margin , profit ) but hit product creation milestones , monthly cash burn rate , how many early adopters customers we want to experiment with , how many community suggestions are implemented , ….
  11. Passion for quality , fast decision making and speed
  12. Choose people that are comfortable with uncertainty , chaos and change.
  13. Ensure frequent Communication with the whole team to share learning
  14. Apply modern crowd based financing techniques after the stage of seed and angel capital

The new process is involving the customer iteratively within the process , is rapidly testing assumptions and makes corrections fast . It involves a number of phases which will be described below and solves the old product creation issues .

The new process is searching for a repeatable , scalable and profitable business model based on a number of steps , iterations and major changes when we find out that our hypotheses is wrong .

The customer development process phases in more detail :

A. Customer Discovery

1. Business Model hypothesis

The founders express and write their vision , company purpose and design the business model. A few informal talks with potential customers and partners took place in advance or in parallel .

The description of the business model is using the Business model Canvas ( available in the Internet) in relative good detail level . The focus is on specifying the following business model attributes

  1. Value proposition
  2. Customer segments
  3. Customer relationships
  4. Distribution channels
  5. Key partners
  6. Key resources
  7. Key activities
  8. Revenue streams
  9. Cost structure

Then an important consideration is the type of market our business will focus.

For the various market types see below the following table describes the different approaches for Customer needs , product performance , competition and risks .

In this phase we build the 1st minimum viable prototype ( this can be a basic power point or a basic website or a video ) to explain the problem we solve to get the first feedback from the initially chosen early adopter customers about the problem we solve as well as other .business model attributes .

Next week we will cover the subject of testing the problem and testing potential solutions with early adopter customers .

Fadli Muhammad

OneLove at Port of Tanjung Pelepas

8y

Welcome all use for right

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Mike Mastroyiannis

Inspiring Passion & Success, CEO, Founder, COO, Board Director, Management Team, Strategy, Innovation, Sustainability, Change Management, Risk Management, Start-ups/Scale-ups, IoT, Author "Xponential Growth", Consulting.

9y

Frederick thank you and I will write more on the modern fund raising in the 3rd part but it will never be as complete and up to date as you could describe it as the expert ! Maybe you could write an article on this subject . Thanks

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Excellent article Mike. We are entering in the age of context and lean startups where founders need to go from prototype to MVP to PMF in an 18 months lifecycle while testing, validating and updating the product/ service in each step (real time) using feedback and data. The fundraising process need also to adapt itself to this lean startups life-cycle and age of context and as you know at EastFounder.co we are working on exactly that ... I'm excited to read your next articles about this shift.

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Mike Mastroyiannis

Inspiring Passion & Success, CEO, Founder, COO, Board Director, Management Team, Strategy, Innovation, Sustainability, Change Management, Risk Management, Start-ups/Scale-ups, IoT, Author "Xponential Growth", Consulting.

9y

Luc Thank you. It is state of the art+ combining , silicon valley start ups experience , most recent literature and own experience.

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Peter Lam

Amazon Lab126 Principal Operation Program Manager, Asia Quality Management System

9y

Very helpful readings! Thanks Philip

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