Three secrets to cost-effectively launching your startup

Every month there are increasingly more people looking to shake off the shackles of the standard 9 to 5 life and embark the exciting journey of launching their own business. But as every seasoned and experienced entrepreneur knows, launching a business is one of the most challenging yet rewarding endeavors that you can undertake.

Social media and the hype around startups have made heroes and superstars out of successful founders, but hasn’t really focused on the challenges, mistakes, and setbacks that these successful, and many other failed, founders, have made that have cost them time and money.

Below is a list of the top three things to keep in mind when first launching your concept to market which will help you avoid potential pitfalls at the early stages of launch.

1. Keep it lean

You may or may not have heard of the lean methodology, but I personally am a fan of the core ideas of lean and the principles that it preaches. Lean is essentially a scientific approach to creating a startup that aims to help you avoid wasting time, effort and cost by going down the wrong direction too far. Lean is a build-measure-learn model that supports an iterative approach to quickly finding the right product-market fit.

This is critical at the beginning stages of launching a startup as you want to reach that magical moment of finding product-market fit and valuation through paying customers as fast as possible.

2. Listen closely and understand your customers

To be successful in your startup you have to not just solve a problem for your customers, but solve it in the right way. The people in the best position possible to tell you whether you are delivering value to them is your customers.

Your primary job as a startup founder is to so deeply understand your customers and the problem space that you can predict the needs and pains of your future customers before they even realize its a problem for them.

3. Find the right delivery partners

Lastly, find the right delivery partners to make magic happen. Find someone who is more than just a resource but a “trusted delivery partner or adviser” who can be trusted to be a subject matter expert in their field and can not only deliver but provide insight and value from their field of expertise.

As a founder, you most likely won’t have the time and/or know-how to deliver on every aspect of your business, especially more low-level tasks that make up a component of your business, so finding the right people you can trust to distribute your workload is key to a fast and efficient journey to launch.

-Lee Jiang

How To Pitch Your Startup Like Chamillionaire

I mentor a number of startups here at Tank Stream Labs and a number of other worthwhile programs. Check out Tech Ready Women if you are a female entrepreneur who wants to get into startups (also blatant plug). One of the most common questions I get is:

HOW SHOULD I PITCH MY STARTUP TO INVESTORS?

Answer – pitch like Chamillionaire. Rapper, grammy winner, entrepreneur in residence, investor, singer of Ridin’ and subject of multiple panda memes. You may have seen this video on TechCrunch a couple of months ago where he fronted his new app Convoz. I think the general impression of most people that saw his pitch it was that it was good. Not just good. Excellent even. You should watch the whole thing if you want to see a good piece.

Therefore I thought I’d do a three part series where I go through what I like to recommend early stage companies do before the presentation, at the presentation and then post presentation. Without further ado, here is part one – my ten tips for getting you and your deck ready pre-presentation.

I. Pitch deck- you need one!

If you are going to pitch to institutional capital or venture capital you need a deck.  That deck should answer at a minimum 4 questions:

  1. What’s the problem I am trying to solve?
  2. Why is that problem big enough?
  3. What’s the solution to that the problem?
  4. Why am I the person(s) who will solve that problem and provide a continuing solution to that problem for the future?

II. Your deck should look good

Your deck will benefit from looking good. As in it should be correctly formatted, have nice pictures, screenshots and/or video.  It doesn’t have to be a masterpiece or professionally designed (coincidentally all 3 pitches I saw at a recent event were all professionally desktop published) but it shouldn’t detract away from your product if your deck doesn’t look great.

If you are producing a new AI model that is 10x faster and can talk about that in depth you can have the worst deck in the world and you can get funded. If you are building a two -way marketplace for goods and you are using Comic Sans then it is going to be tough to get your point across and you will have to start from a handicap. So don’t start from a handicap. All decks should typically be in PDF for this reason, never send in PPT or in some sort of weblink, it just annoys VCs and often the formatting is off.

III. Identify and resolve potential objections before pitching

Think about all the things you think someone could say as to why your idea doesn’t work and try and proactively include this in your pitch. If you think there is a risk the market is too small you can include on the slide that you aim to start in market x, dominate it then move to y and z where the total addressable market is more.

Don’t have a CTO and you aren’t technical? You should include the fact that you are in the middle of recruiting that person. If your platform is based on access to a technology you should include that you are negotiating contractual terms on that access for the next x years.

Obviously there is a fine line between future looking and exaggeration but there is no prize for exaggeration because often these become conditions to investment you have to fulfil. So if you aren’t a week from hiring your next R developer, don’t promise that you are – transparency works both ways! If someone tells you an objection in the pitch the only way in which you shouldn’t have an answer is if it is a really obtuse one. Assume there will always be questions about:

  • Size of your market
  • Unit economics
  • Competitors
  • Value proposition
  • Ability to scale
  • Company X that the person already invested in

IV. You don’t have zero competitors

I am always very concerned when someone in the pitch says they have zero competitors or pulls out a slide which shows them as the only product in the top right quadrant and everything else is in bottom left.  The biggest thing that derails a pitch I have seen is where the startup is in a diverse industry (consumer, social, e-commerce) and the slide goes up with 3 competitors and the investor asks “how are you different from X, I already invested in that” or “I passed on that”. If you don’t know don’t guess or try and make it up on the spot. Ideally, you have researched broadly into the space so you would know- but if you have no idea, just table that for discussion afterwards by saying “happy to take that on board at the end of the presentation if you send me some materials I will provide a detailed comparison post this meeting”.

Note that in your preparation for an investor pitch, no excuses for not knowing something in their current portfolio or that was recently exited (and ideally you’d look at their past investments section which is on most websites). When you have zero competitors you have no spend associated with your product. Investors immediately think this means very high customer acquisition dollars and marketing spend and this will be uncharted territory.

V. Understand your unit economics – are they reasonable?

The main thing an investor is looking for is some understanding of the actual or proposed marginal product unit economics. So what is the fixed cost base you need to survive and then post that how much do you make for each marginal product? If you are in an industry which has unicorns as your competitors (versus traditional business) you will find it very hard to pitch VCs a negative unit economic market share model for a winner takes all market e.g like Uber.

Make sure that your product pricing slide has a positive unit economics for each marginal product. The flipside of that is that if your marginal profit is $1 before fixed cost operating expenses and you have a fixed cost base of $2m then investors will naturally ask you how long and what is the plan to sell 2m products (and also is there a market for say 20m products). If you think that you can’t sell 2m products you need to rethink your pricing and/or market.

Also as another tip, the long-term customer acquisition cost (CAC) in your B2C startup is very unlikely to be $5, no matter if that’s what your first 1000 customers are! Again a subject for another topic but great founders will understand that costs are likely to trend to the industry average unless you can demonstrate a particular value proposition. So therefore if you are comparing yourself against an incumbent and they have a CAC of $100, you are unlikely to have a long-term CAC of less than $50-75 unless you can specifically show data or you have a systemic advantage. Unless you have genuine virality and user metric growth in a dashboard, plugging that gap with “social media” or “user referrals” is immediately discounted by investors.

VI. Practice, practice, practice

You should have presented the pitch at least 10-20 times before you go to the investor. In the valley, I’ve heard 50 times before the investor you want. Practice to yourself, with timing. Record yourself, play it back. Practice to your friends, family all you want but hopefully, you will get to practice to friendly investors, your peers, advisors or other startups. Ask for feedback and iterate that feedback into your deck. If people lose interest ask them specifically where they lose interest. Often the areas which founders spend a lot of time on have no interest to the investors. It’s great to hear 1 mins about how you came up with the idea as you were biking around Costa Rica, but less fun to hear ten mins.’

Also legitimately at least 50-75% of product demos I see do not work in some way on the day. So have practiced your product demo on the day at least once. Ask to come in 15 mins early so you can set up. Bring your own internet and be prepared to connect to it. Bring an HDMI cord for your laptop.

VII. Cut unnecessary slides – less is more

Team should be one slide, I’ve seen up to 5 slides with full-colour pages of the founders headshots as the entire slide. Unless your team has a specific advantage (first person to crack SSL encryption etc) you should assume that the default assumption is that you are all competent unless something goes very wrong in the pitch. If you think there is a specific disadvantage that you need to overcome in the deck e.g you have no technical co-founder or you will be seen as “too X” then you can create wording around that. I would try to keep to one slide though. Other slides which often go on for too long are below.

  • Mission – one slide max
  • Market – two slides max
  • Timeline – one slide max
  • Logos for partners – one slide max
  • Press clippings – one slide max
  • Almost anything else is unlikely to need more than 2 slides! One slide is better!

VIII. Financials and tech roadmap – the sad forgotten cousin of full-colour product shots

You always see these tucked away at the end of the deck. A sad little 3 statement revenue to EBITDA forecast with no assumptions that gets zero time in the presentation. Or a picture of a computer stock graphic with “AI-centric design roadmap”. The more you can take investors on the journey with you by showing them what underlies the financials (who doesn’t like to make money) or the roadmap (how we can get better together) the better it will be. As I’ve said in a previous post, you need to ensure that the first 12 months of your forecast are pretty well locked in, you have pretty good confidence (i.e good rather than ok) about doing 75% of the next 2 years and better than not confidence for half of the total forecast revenue you show.

On the roadmap, pet personal peeve – don’t include AI or blockchain unless you really know how AI or Blockchain helps your product. There are too many people including it as a buzzword so investors are generally skeptical if there is a sense it is an “add-on” rather than core to the final product. So if you don’t know anything about it, it will reflect very badly on the presentation if you get asked something about Tensorflow and you don’t know what that is. Buyer beware!

IX. Bring Snoop Dogg!

Chamillionaire brings out Snoop Dogg at the end of his pitch. I encourage you to bring Snoop Dogg if you know Snoop Dogg. But for most of us, that means end strong, end on a high note and leave them with something they didn’t expect to see. Most pitches start really strong then peter out by the end. The last 2 mins of the pitch are very important. It should be a call to action “who’s ready to come join this journey with us” or humor or try to have something other than “so that’s the end of my presentation” – which I actually hear about 40% of the time. End strong and leap into a positive discussion!

X. What’s in it for me?

Everyone talks about the “internet of one” i.e the webpage you see should be different to what I see. In the same way, you should adopt the “investor of one” concept. If you really want someone to invest ask “what’s in it for them”. Do they have a company that would have a great synergy? Do they have a track record of investing in this type of companies? Is someone they know already on your board that they can connect with? Are you just about to launch something that will require further investment? Can you give them good publicity in your article on TechCrunch etc?

The best pitches are tailored to the investor, but often you may not have time to change every slide. So, therefore, try and include one slide which is an “investor” slide e.g it outlines a potential commercial partnership with one of their investee companies and how much that opportunity might be worth split 50/50.

Jason Cheong 

The Essential Panacea For Founders

As the expression goes ‘Success has a thousand fathers, but failure is an orphan.’ Failure is inevitable if you are unable to listen, absorb & assimilate feedback. You then must incorporate that great feedback to make your venture better, stronger and potentially unassailable. You need to do this every day.

In 2018, everyone wants a dashboard, a GPS hack, a shortcut to success. But who will sift through the dross and distill the deluge of information to extract the essential information for your business? You will.

You are the arbiter of your business. The buck stops with you. If you want to be great, you have to understand the basics and get them right. A start-up often uses the metaphor of a rocket launch, so I will borrow that to remind You — the pilot- that the mechanical failure and ensuing explosion was due to a failure on your part to pay attention to the signals. Trust me, if you crash and burn this time, lining up some more founders, funds or a team at your next launch will be a tough ask. To avoid the crash takes hard work, continual honest introspection combined with unshakable self-belief.

During the last 20 years in business, I have worked through a lot of different problems, perhaps twenty thousand of them. Why? Twenty thousand problems other people bring to me to solve has driven me to be better at what I do.

Clients, staff, friends, families plus new and world-class entrepreneurs are my people. My Care Factor is off the chart on my imaginary DIST diagram. People say a wise person learns from his or her mistakes, but a wiser one learns from the mistakes of others. Resolving a multitude of problems every day has improved my ability to predict, avoid and resolve problems.

If you are a founder looking for someone who can help guide you and help you focus on the critical issues for your business, drop me a line.

Advisory’s Panacea aka the checklist/tool/life hacks for navigating your journey.

1. Pick the best possible subject-matter experts in your network. Love them (in a platonic sense).

2. Ask questions that will help you to move forward, don’t just seek praise. Your dog and your Mum will give you unconditional love, you need some tough love and brutal honesty. Now. Urgently.

3. Read widely, (listen to talking books if you don’t like reading) but really absorb, evaluate and reflect. Write notes too, underline and disagree if appropriate.

Look at companies 18 months ahead of you. But also look at the Masters regardless of them not being in your space/market/ whatever — great is great. But remember to differentiate the hype from the facts — Don’t believe marketing hype of a high flyer. Everyone has their good and bad days.

4. Look at your problems and challenges from different angles. Then come back and look at them again. You can’t solve every problem in one sitting. Michelangelo took 4 years to paint the ceiling of the Sistine Chapel.

5. Do it with music, or meditation — find what fuels your creative juices at the time of writing. For me, Bruce Springsteen’s Dancing in the Dark is blaring as I write.

6. Decide…then have the courage of your convictions.

7. At regular intervals, repeat steps 1 to 6.

This too is no formula; YOU have to work it out.

Did I mention 30% of your time will be spent thinking about managing money and resources? By managing money, I don’t want you to picture a banker, VC or financial planner. I want you to picture a Great Founder. You want to be a great entrepreneur, step up.

The high-five moments make all the struggles worth it, for me at least. If I have invested in the company, that’s a bonus. Lunch this week with a founder was a Kodak moment; his usual facial expression, cool as a cucumber was more of a nodding know than a cringe. He was lucky to have survived the first 18 months. I give you Hartley Pike of Construction Cloud. He was green as grass (commercially) when we met. We were discussing an oversubscribed next round of capital over some great Middle Eastern food. Hartley and the team are reinventing the way worksites work for Engineers, Foremen and CEOs. This Angel investor loves it too. Simple, cost-efficient safety at your fingertips and at scale real time. The verdict: a game-changer for the building and construction industry.

I certainly didn’t choose to amplify founders’ weaknesses for some cheap laughs. Everyone started somewhere and if they applied themselves, they transitioned. If you see yourself, or others, exhibiting these traits, I hope my article is a panacea to be shared with new founders.

My message is simple: Power is knowledge, or should I say knowledge is power?

David Kenney

Start-up mentor and investor