Merry Christmas and Happy Holidays! Christmas is a great time to reflect and give thanks. Here are a few previous posts on celebrating and giving thanks in startups:
I hope everyone has a great day. Merry Christmas and Happy Holidays.
One strategy startups should consider is packaging the same product into multiple products. There are three common ways this is accomplished:
Most often, one size does not fit all and buyers like to buy when a company speaks their own language. My recommendation is to consider ways to package the same product into multiple products.
Earlier I talked about how most startups are more valuable on day 0 than on day 100. Now I want to talk about how capital, and access to capital, becomes cheaper as a startup grows. You see, through the concept and seed stage of a startup, you’re most likely bootstrapping, investors outside of Silicon Valley aren’t likely to invest, and banks won’t lend without hard assets. Once you hit the early stage ($1M+ run rate) and growth stage ($5M+ run rate) capital starts getting cheaper and cheaper.
Capital starts getting cheaper and cheaper because risk in the business is removed as revenues become more and more substantial. The risk of a market not being present is changed to more of an execution risk. Execution risk is much more understood than is-there-a-business risk. With revenues in the millions banks will do more substantial lines of credit based on receivables as well as recurring revenue. Investors, especially venture capital and private equity, is plentiful for fast growing, profitable startups with millions in revenue. Capital is cheaper and more accessible as a startup grows.
What else? What other reasons is capital cheaper as a startup grows?
One aspect of growing a company that I didn’t consider 10 years ago is building a leadership pipeline. The idea behind a leadership pipeline is that a startup can only grow as fast as its people grow and managers need to grow with the business. Think about the following:
So, the goal is to promote from within whenever possible, so some front-line employees need to be groomed into managers, and then managers need to be groomed to be managers of managers or executives, and so on. My recommendation is to consider building a leadership pipeline as your startup grows.
What else? What other considerations do you have about a leadership pipeline?
Generally, I’m more of a fan of doing rather than planning but I understand the importance of getting everyone on the same page. With that said, it’s important to plan in a way that’s relevant to the size and stage of the startup. Yes, a 100 page business plan for a company not yet started is almost always overkill. On the other hand, a one page plan is almost always the right size for leadership purposes.
Here’s how I think about the planning frequency at different startup stages:
Startup size and progress plays an important role in planning frequency. My recommendation is to move quickly and keep a simple one page plan.
What else? What other tips do you have for planning frequency at different startup stages?
Remember the scientific method as a kid in fourth grade science class? Well, all the same principles apply to startups. Let’s review the scientific method courtesy of ScienceBuddies.org:
The scientific method maps perfectly to the world of lean startups and should be used liberally.
What else? What are ways is the scientific method applicable to startups?
One of the most common terms used to describe growth in a startup is a hockey stick. The idea is that things like users, page views, or revenue starts growing at a normal linear pace and then, once an inflection point is hit, growth takes off at an exponential rate. Here are a few things to keep in mind regarding hockey stick growth for startups:
Being part of a startup with hockey stick growth is an amazing experience that doesn’t happen too often. Startups should pay attention to their growth pattern and understand when the linear growth turns into exponential growth as well as when it turns back into linear growth.
What else? What are some other things to keep in mind about hockey stick growth?
Continuing with yesterday’s post on The Search for a Business Model it’s also important to think through when to pivot in a startup. A pivot, or iteration, is when you take information learned and make a change to the business model, some changes more dramatic than others. Here are a few items to keep in mind when considering a pivot:
In general, I’ve seen that people don’t pivot soon enough and continue down a path that isn’t working. My recommendation is to pay close attention to progress, or lack of progress, with the current business model and don’t be afraid to make changes quickly based on new information.
What else? What other tips do you have when thinking through pivoting in a startup?
When an entrepreneur starts telling me about their business I always try to tactfully ask a few qualifying questions like the following:
That last question “How long is the sales cycle” starts to get at the maturity of the business as well as if it is a revenue generating company or a startup in search of a business model. Most are in search of a business model. The search for a business model is one of the most difficult parts, hence an area most entrepreneurs get stuck, and go out of business if they don’t break through. Note: I’m talking about innovative businesses and not replicative businesses.
Here are a few thoughts on the search for a business model:
The search for a business model is filled with high highs and low lows. Know what you’re getting into and keep an open mind throughout.
What else? What other tips do you have during the search for a business model?
How many times have your heard someone say “that technology would be easy to build in a weekend”? My immediate response is that most technology companies aren’t successful based on their technology alone. In fact, it is a useful exercise to understand potential competitor metrics and resource allocation when thinking about getting into a market. Here are some items to consider:
So, the next time you think about creating a product or pivoting into a different market, use some of these techniques to better understand competitor metrics and resource allocation.
What else? What are some other tools you use to analyze competitors?
David Cummings on Startups 