Status: 2019-08-31 this is a 1st release, please feel free to comment, suggest resources, ask FAQ!
I sit on pitching benches and at Angel presentation meetings, and have enjoyed the conversations with some really bright entrepreneurs, investors and advisors. There is a vibrant energy and enthusiasm, and drive towards solving certain problems, meeting needs, fixing pains, and generally making the world a better place. There is much dedication of people who work evenings, weekends, sometimes giving up their jobs to grow their acorn of a vision into a great oak of a thriving enterprise, that people will admire and enjoy the utility of their work.
Some of these startups get funding, some launch products, some are still thriving after 3 years. This path requires dedication, and resilience in the face of adversity and the challenges that life dishes out. But there is too much waste, because not all of this energy and passion survives to bear fruit. I have been trying to distill some useful advice, with an easily applicable framework, to reduce this terrible waste.
Take the case of Fred (real name changed to protect the guilty party), who used a leading product in a financial services company, was frustrated by it numerous weak points, and came up with a seriously clever idea with some colleagues of a way of doing it much better and cheaper and founded a startup with his fellow experts… a surefire success in the making?
Will Fred’s business:
(a)rush up to reach the stars, take him and his co-founders to a techno-elysium
(b) crash and burn, with Fred and his colleagues never quite realising what went wrong
What do you think?
Well here comes the science, distilled down from discussions and anecdotes from fellow Entrepreneurs, Investors and advisors (yes I have done all 3!) and let’s see if we agree at the end!
The”missing Vital Trinity” SYNDROME:
I will be writing lots of articles on how to help, but here I will deal with the Vital Trinity, and come with me, because it is it really affects the success and failure of many startups, and I will show you how improve your odds to succeed.
You must have at least one individual to champion each of the Vital Trinity in your company.
Getting this wrong is a kind of startup halitosis, that the founders are oblivious to, but the seasoned investor usually finds pretty distasteful!
Vital: where one’s comfort zone is, energy, inspiration, experience and know-how is
Trinity: the 3 areas that you have to have for a successful business Customers, Creatives, Corporate (there are references at the end to support this).
I have played all 3 roles, as a computer/robotics engineer, as a management consultant then CEO running a company from startup to exit, and as a salesman selling every thing from mass-marketing simple virtual numbers, to selling 5 figure gold telephone numbers. In truth although I can switch roles, my predominant passion is for creativity, but I have realised that creativity without customers and corporate is usually wasted energy.
Vitality#1 Customers: You know what customers are, you can SELL, you can TELL STORIES about what customers needed, and why they bought things. You can sense the VALUE to the customer, and the process by which the customer buys this and other products and services….etc
Vitality#2 Creatives: You can create the product and the service, you understand the options and processes. You can choose the right strategic partners/technology/services, and can deliver timely quality services…etc
Vitality#3 Corporates: You can run the company, set the strategy, keep everything running, make sure that the salaries and bills are paid. You have an eye on the exit for the company, the market environment, the brand and perception of the company…etc
The”missing Vital Trinity” CONSEQUENCES:
If you get this right: you will create product that will alleviate customers’ pain, at a price and tariff that is attractive, with enough sales to create an attractive and sustainable business. You will do this with fewer/smaller heart-stopping surprises and crises:
Success you will be more successful as a team, you will focus more on your strengths
Lower stress the company is a nicer place to work
EasierInvestment you find it easier to attract investment
Earlier successful scaling you get your product orientated quicker, and then can start to scale on what people really want.
Exit when you should, have to, want to exit, you have more people interested, and you get a better price
Investors are looking for this potential.
If you get this wrong: you will wonder why
– customers don’t buy your product
– they must be really stupid to see how much it could help them.
You will probably develop too many features, with not enough quality, and under-charge. You may become very bitter about the whole experience:
Failure you will spend a whole lot of time delivering what you think that the market needs, rather than what people want
Stress things are just not going the way you want and people just don’t seem to be able to do their jobs well.
Bad Early Pipeline your sales pipeline will work badly in the early stages, and you will tend to only make sales through existing contacts (“most people do not get our product, until we can talk to them for 20-30 minutes”).
Investors have grim anecdotes about this kind of company!
The”missing Vital Trinity” MEASUREMENT:
Missing Customer Vitality#1
Missing customer vitality is frequently a problem, as companies are frequently started by creative types, who have solved a problem that they had/observed, and have rushed into creating a solution. Doing customer validation/research can almost be seen as doubting the product and mission of the company.
Timespent/Timesheets/Interview reports: How much time are you spending as a company on these areas, how many market research/customer interview reports are you doing each week?
How many sectors have you identified, and then gone out to get actual example stories, pain points, and all the good product management insights on what the customers are REALLY like.
How many customers and sectors have you deferred/rejected. Do you feel confident that you know what you want, and can focus on the best customers and sectors.
Do you have any first hand evidence that real customers will pay you money (Lean startup…Behavioural evidence) Has everyone in the startup spoken to actual/potential customers, and talked about their pains, wants, needs and how they buy things? Can they recall them?
Missing Creative Vitality#2
This is not usually a problem, although sometimes creatives have sometimes over-estimated their ability to manage new domains, within the time and budget.
You can not simply “outsource” creativity, and throw the problem over the wall.
What are the main tasks areas to be done, how much experience do your team, tools, suppliers, contractors have?
Where are you going to have to be innovative, and where can you “just get it done”, can you do all the bits, not just the fun bits?
Can you talk clearly about the risks and sensitivities and how you will manage them.
Missing Corporate Vitality#3
This is frequently a problem, and as a direct consequence you will be doing things wrong, but also you are probably going to find it harder to build a equal relationship with investors. Sometimes “Customers” and “Creatives” have a disrespect for this type. You do not need to have someone full time to do this.
List your potential exits (at least 5!), and why should specific people/companies pay money for your equity? What are comparable exits, valuations and value drivers? How can you optimise your exit? What are the sensational exits in your area, and what drove them? What are your contingent exit options?
List the company’s advisors, friends, investors, and how can they help driving the success of the company?
Show how are you going to drive income, and what are the sensitivities? What are the measurements so that you know that you are on track?
Document who are the market players, where do they fit in the competitive landscape, and how can you compete with them? What drives the market (e.g. classic Porter analysis)?
Have your staffing plans, what roles are needed, and what are the dynamics of how people will work together.
Following my own advice…where is my vitality? I have worked in all 3 areas, my vitality is probably Creative, but I have worked hard to push my mind-set so that I can switch my Vitality area as needed. It is much easier for me to do this, as :
a) a Mentor/Coach/Fractional Employee, I am under much less stress, so I can help people who are under much more stress!
b) I have consciously trained myself to do it.
Measurement: How to check your Vital Area
When there is a problem, where you go?
What previous experience do you have, and what did you most enjoy?
Customers: You are probably a people person, processes are a necessary evil, or just something that you have to put up with. You can sell, and you can tell stories of what people bought from you, why they bought then, and you can discuss the pricing, packaging and purchasing processes of individual customers and sales.
If there was a problem with sales, you would probably go and talk to customers.
Creative: You are probably a process person, you enjoy solving problems better than other people, with good technology/techniques. You can simplify things and produce elegant solutions. Sometimes customers are too lazy to understand how you use your services/products.
If there was a problem with sales, you would probably work out what features could be added or improved to make the product better.
Corporate: You are probably a money person, with a bit of process and people person, but only like to use these skills for what is important for your objectives.
If there was a problem with the sales, you would probably review the people and what they are doing, the competitive/strategic/regulatory environment, and might consider your segments, or an investment/exit strategy.
Here are some solutions, but feel free to get in touch if you need help.
If you are missing Vital areas, then go out and get the people on board (even it is only as an advisor).
Missing Vitality#1 Customers:
Learn to communicate your idea and business (see elevator pitches for a starter).
Learn how to sell your product yourself, get some stories, so that you can start to talk to someone who is customer orientated.
Missing Vitality#2 Creatives:
Learn what motivates creatives
Missing Vitality#3 Corporate:
Do a first pass at some of the corporate work, especially the exits!
Learn how to tell your story from a Corporate POV
Did I invest in Fred, and what happened?
Why did I run a mile from Fred?
Fred is surrounding himself with smart creatives, who do not respect “Customers” and “Corporates”.
A smart bunch of creatives will fall victim to group think, and will reject contradiction from reality.
Anyone voicing dissenting views, will be regarded as disloyal, and find themselves marginalised. If they know “what is good from them”, they will leave or toe the line.
They will over-estimated the importance of the need that they were helping with, in the customer’s world, and assume that customers were like them.
Fred should have got some “customer” types, and they should ALL go out and talk to customers, and get the stories (market validation).
Fred should have someone (possibly part-time), who will watch over this as a BUSINESS that in on the journey from Startup to Exit (the corporate vitality)
and what happened?
Fred was quite charismatic, and enthused a rather naïve investor. Fred surrounded himself with some very clever like-minded people, and they produced the product in record time.
Sales were negligible, and Fred went back to the drawing board, with the release of a second version, Fred hired a sales and marketing person, who clearly did not know their stuff, because they just failed delivered to deliver results, and seemed to side with rather unappreciative customers.
After several arguments, the sales and marketing people left, and there was a sigh of relief with in the team, as they got on with the 3rd version of the product.
Despite pleading with an increasingly wary investor, who was deaf to the reasons why the 3rd version was going to be a success, they ran out of run-way, and closed down.
Fred is still sore about his philistine customers.
The investor now has this as an anecdote
Other authorities and resources.
Alex Osterwalder of Strategyzer, (Lean Product Canvas fame)
How To Systematically Reduce The Risk & Uncertainty Of New Ideas
Desirability (Customers), Feasibility (Creative), Viability (Corporate)
In Berlin 2018 he said along the following lines “after you have got funded, no coding/prototyping, everyone goes out to talk to customers and find out what they desire”
Dave Bailey “The Founder Coach”, who writes some good articles and coaches high growth series A+ CEO’s
Why Founders Market Their Products Too Late
The Startup2Exit.club, who are “young and passionate, on the matter”…and authored this article!
ElevatorPitching and PitchingClub so that you can recruit people with different comfort zones than your own.
My startup is in early stage, and we are very Creative heavy, how can we go about getting some Customer and Corporate people on the team…PS we do not have any money yet!
This is a very frequent problem, and I am often asked this question.
– Please feel free to come along to the pitching club, and I can give you a quick assessment on how serious I think that this is. If you have a pitch deck, I will be able to see quite a lot of this. see PitchingClub
– Create some elevator pitches so that you can network try to get a “Customer” and “Corporate” on board (even if only as advisors). If you don’t have money and can not communicate what a great idea you have, then you are in serious trouble! see: ElevatorPitches
– Get out and talk to your customers, and get some stories, try some market validation. Creative people are frequently uncomfortable about this, but once they have succeeded in doing it, they get a fantastic sense of achievement and personal development.
– Be prepared to let Customer and Corporate people add value. This is not just about everyone blindly following the initial vision. The collective noun is a company of people…it’s a social process!
Do I have to have all these types on my payroll?
When you can afford to have them, yes… at least on a fractional employment basis. At the start, you may need to have them on an advisory basis.
What do I do as a CEO/MD when they disagree, and I need to make a decision?
Welcome to the joy of being a CEO/MD! You have to get clearly stated opinions, listen fairly, and then make a decision, unilaterally if you can not get consensus.
If you get a lot of these problems, then you have a team problem.
Got another FAQ…please email them to Rob.Darwin@Startup2Exit.club