By Francis Moran and Leo Valiquette
This is the ninth article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.
There is a German proverb that states, “An old error is always more popular than a new truth.”
This is often evident in the business of getting technology to market, particularly among nascent entrepreneurs and startup management teams who are coming into the process of commercialization well-versed in the engineering of a product but not so much in the fundamentals of business planning, customer engagement and market development.
Today and next week we will look at the nuts and bolts of making a venture succeed with practical bits of business advice that have emerged from our various interviews for this series.
Today we will emphasise business best practices. We will not be giving these points an exhaustive treatment, but we do want to hear your thoughts and opinions in the Comments section below.
If it made sense then, it makes even more sense now
When we interviewed Doyletech’s Denzil Doyle, we asked if he thought it worthwhile to update the key bits of advice he gives entrepreneurs in his bookMaking Technology Happen, considering that its last edition was published a decade ago. His response? “Some things withstand the test of time.” We will begin with two of his fundamental commandments for startups:
Write a business plan – a new ventures business plan. This is a roadmap for how the company will evolve and to attract potential investors. It differs from a business plan for a going concern in that it will have little, if any, historical data from which to make revenue projections and other forecasts. It is, therefore, based on no shortage of assumptions. As Frank Peters, one of those potential investors, observed in his guest post many weeks back, entrepreneurs have to make a credible pitch that articulates when and how investors will see a return on their investment.
Have a clear product-migration strategy. “Any new venture which starts out with only one product in its portfolio is probably doomed … follow-on products should be clearly visible at the outset,” Doyle writes. A product-migration strategy is crucial to keep the market engaged with compelling new products as older products mature. Further to this, “the first product or service should be followed up very quickly with two others, one with a lower price and lower functionality and the other with a higher price and higher functionality.” But each of these products should be a “total product” that offers a complete solution to a customer’s needs.
- The collapsing cost of product building
- The ability to rapidly test business models with quick market engagement
- The use of lean startup methodologies, which allow startups to go through more iterations of their product with less cash.
Anthony Lee, general partner at Altos Ventures and co-founder of the C100, also spoke with us about how these trends have accelerated the process of commercializing technology. It has become easier to quickly get the product and market fit right, and it is all the more crucial that startups do so. To turn these new market realities to their advantage, entrepreneurs must be willing to learn quickly, fail rapidly, and regroup without delay. This requires that they be “honest and objective about where they are with their product,” Lee said.
John Stokes, a partner at Montreal-based Real Ventures, furthers this point by saying, “Your success is not based on your core ideas, it is based on how fast you can respond and reiterate the feedback coming back from your market.” Entrepreneurs must “get their heads out of the sand to see what competitors are doing, what is happening in the market, and where there are dead ends and emerging opportunities.”
Chris Albinson, managing partner of Panorama Capital and co-founder of the C100, said startups with products or services focused on larger enterprise customers must consider the value and benefits they will derive from their first customers in addition to revenue. His advice? Go for “customers who are going to push you the hardest to develop a globally competitive product.” He has found that Canadian firms in particular make the mistake of picking a Canadian customer as their first. The issue here is that Canadian customers are often “more conservative and tend not to be early adopters … they don’t have a world view when they select innovative technology” when compared to large enterprises south of the border.
Weren’t we supposed to launch v1.0 by now? Phil Newman, CEO of Pergali, said startups often have a poor understanding of just what is a “product launch” versus a beta test of their technology. Startups must be able to distinguish between the two. In his experience, entrepreneurs often underestimate when they are truly launched and lose sight of version 1.0 of their product.
“My guidance is to very clearly state what v1.0 of the technology is and just deliver that,” he said. “Companies always see new ways for how their technology can be developed, what new capability can be added in, but then are frustrated by delayed market entry. They are actually working on v1.3 when they haven’t put out v1.0 yet. Don’t burn your cash and don’t waste your time, or anyone else’s.”
Newman also finds that startups often “don’t think about the post sales support infrastructure sufficiently to scale the company. This is where growth is hindered or delayed … sprinters must hand off to the middle-distance runners,” who he defines as “a good middle-management team that thrives on delivering continuity and quality.”
Next week, we will revisit the people factor and the challenges that are often posed by that person in the mirror.