Focus on Customers from Day One

“Startups Fail from a Lack of
Customers
not Product Development Failure”
Steven Blank 2008

Start-ups have to have a process to develop
customers in parallel with product development
processes.

Focus on Customers and Markets from Day One!

Mind2Net, Inc. © 2011 all rights reserved

The new start-up funding reality is you have to show
TRACTION

TRACTION = SALES Revenue = INVESTOR interest = get the MONEY

Everybody has a product/service idea but
most entrepreneurs focus on developing the
product/service thinking “if we build it they
will come” – NOT!


What Early Stage Investors Are Asking?

• Are you going to:
– Blow my initial investment?
– Or are you going to make me a ton of money?
• Are there customers?
– How many? Now? Later?
• Is there a profitable business model?
– Can it scale?


Step 1 Startup Checklist

• Opportunity Where does the idea come from?

• Innovation Where is the innovation?

• Customer Who is the User/Payer?

• Competition Who is the competitor/complementor?

• Sales What is the Channel to reach the customer?

• Marketing: How do you create end user demand?

• What does Biz Dev do? Deals? Partnerships? Sales?

• Business/Revenue Model(s) How do we organize to make money?

• IP/Patents Regulatory Issues? How and how long?

• Time to Market How long does it take to get to market?

• Product Development Model How to you engineer it?

• Manufacturing What does it take to build it?

• Seed Financing How much? When?

• Follow-on Financing How much? When?

• Liquidity How much? When?


Step 2

 Is there an articulated customer need?
 How do you know?
 How big a market and when?
 Are others trying to solve it? If so, why you?
 Does it solve an existing customer problem?
 Do you have a sales roadmap?
 Org chart? Influence map?
 Do you understand the sales cycle?
 ASP, LTV, ROI, etc.
 Do you have a set of orders ($’s) validating the roadmap?

 Does the financial model make sense?


Step 3
Parallel Development Tracks
Product Development Cycle
Feedback

Concept/ Product Dev. Alpha/Beta Launch/
Bus. Plan Test 1st Ship
Feedback

Company
Building
$$$$
Customer Customer
Validation
Discovery Need
Validated Traction

Yes I’ll buy this
“chasm”

Customer Development Cycle


Step 4
Know Your Customer - Questions

 What are your customers top problems?
 Does your product concept solve them?
 Do customers agree?
 How much will they pay?
 Draw a day-in-the-life of a customer before & after
your product
 Draw the org chart of users & buyers


Step 5
Iterate

• Until you “cross the chasm” and validate market
need.
• Traction comes after proof of sales.
Increasing

• It is a strategy not a tactic. population of
affluent singles
over 40

• Define the market landscape to represent reality.
• Emphasis is on learning & discovery before
execution (or it could be your execution).

It’s hard work and usually you need
outside help


Step 6
Where to get help?

• Put an ad out for the talent you need to succeed -
Offer equity
• There are many organizations with talent that you
can tap for free (Crunch Base, Score, SBA, Start-uppers, FB,
LinkedIn, search)

• Use online tools
• Enlist a family members help
• Crowd Source


Step 7 Funding

• Develop your Pitch Deck
• Summary with Ask, Market potential, Product Niche, Scale, …
• 8-10 other slides – market forces, customer need, product
description, sales strategy, scale strategy, financials – 3 yrs
proforma, exit strategy, team, supplemental slides (make it visual)

• Make a video Pitch
• Post/Pitch to Angellist, Keiretsu, Y-combinator, Crowd
Funding, Golden Seeds, Fund Me, Band of Angels,
Norcal Angels, Institutional investors, Private
Placements, get out here…
• Practice, Practice – Make a compelling business case
• Traction will attract investment


Step 8 Due Diligence Binder
Be prepared – Put this together early – Accelerate the Funding Process

Due Diligence Binder Table of Contents Marketing Plan
Executive Summary Advertising Plan
• Business presentation Business Operations Processes
• Product/Brand definition • Sales and engagement overview
• Monetization Model • Contract and payment terms
• Management team bios • Business process flows
• Ownership structure – CAP sheet • Expansion plan overview
• 2nd deck and process overview slides • Position descriptions and training overview
Financials • IP product application(s)
• IP algorithm
• 3Year P&L summary, scaling, ROI, 3yr P&L worst
• Network architecture
case, and cap table
• Contingency planning
• 2011 financials
• IP management and protection
• 2012 financials
• Legal representation and trademark
• 2013 financials
• Data Privacy Policy
• 3 Year cash flow summary, worst case and expansion
cost summaries Human Resources
• Hiring profiles and policies
Market Research
• Compensation structure
• Who is our customer?
• Incentive Comp. structure
• Current market penetration and engagement
• Benefits
summary
• Policies & procedures
• Competitive analysis
• Code of conduct
• SWOT –TOWS analysis
• Records Privacy Policy
• Competitive landscape – Scatter diagram
• Focus group research Investor Relations
• Brand
• Beta test interview notes
• Partners
• News articles

Step 9 Company Building

• Is your team right for the stage of company?
• Does sales growth plan match market?
• Who/How will drive innovation?
• Does burn rate match revenue model?
• Have we built a mission-oriented culture?
• Can we own the market or are we threatened by stiff
competition?
• Are we listening to our customers?
• Does the board agree?


From stealth start-ups to cloud commerce to
going businesses - East Bay Score’s
experienced counselors can add value in
Starting
Running
Growing
Your Business.
Call us at (510)-273-6611
info@eastbayscore.org


Focus on Customers from Day One

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