Entrepreneurship Education: Incubator Business Models

Posted on Thursday, Mar 18th 2010 You have read my last Forbes Column, An Underused Tool For Job Recovery. With unemployment soaring, I discussed how incubators can help people move into self-employment and create jobs. Weve also discussed the topic of why incubators fail at length here. One of the issues that came up in the incubator discussion as a cause for failure is: What is the right business model for an incubator? This is what I invite you to discuss in this thread. [Please note that since this discussion took place here on the blog, we have launched the One Million by One Million global initiative, and for incubators looking for a viable business model, you are very welcome to reach out to me to become a reseller of our premium program priced at $1000 annual membership fee.] Every Thursday morning, I coach five entrepreneurs with many more listening to the sessions. And like a parrot, I keep asking these entrepreneurs to validate their ideas. I give them a framework with which to do so. I give it to them ahead of time hoping they would use it and come prepared. And yet an abysmally low number of them do so, making lack of validation of the business idea the single biggest reason for Infant Entrepreneur Mortality (IEM). It is hugely frustrating. In our recent discussion on what entrepreneurship programs, business schools, and incubators must teach, the issue came up time and again. So, in this thread, I invite you to discuss what your educational program is doing to teach entrepreneurs how to validate their ideas. I am sure many of you are reading 1M/1M Ambassador Irina Pattersons Seed Capital series where shes interviewing seed investors from various walks of life, and with a diverse set of perspectives. Whereas Mike Maples is interested in the top 15 deals in Silicon Valley each year, Basil Peters likes to invest in businesses that have a quick exit path. This poses questions and options for entrepreneurs: Who is the right seed investor for you? Those of you who attend my roundtables know that I am a strong proponent of target shooting, versus spray and pray, in trying to find customers. Raising money is the same. My philosophy is to identify who is the best fit for my particular business and focus on that person. Note I said

person, not firm. The business of venture capital and angel investing is a highly personalized one, and individual rapport, relationship, and expertise are really what are at stake. As you read more of our Seed Capital series, please keep this in mind. The reason were bringing you this in-depth series is to help you get to know these individuals and their preferences. In addition, some of the angels work in groups. We are also bringing you the in-depth details of how these groups operate, how they screen deals, and what their investment criteria happen to be. As you know, our operating procedure in 1M/1M is homework. We worship at the alter of a single god: work ethic. If you have the work ethic, we can teach you how to do the homework and craft your business, block by block. Our Seed Capital series is to help you do your homework better. Enjoy!

Positioning: How To Test, Validate, And Bring Your Idea To Market

Posted on Tuesday, Aug 11th Previous Page Entrepreneur Journeys Volume 3 Positioning: How To Test, Validate, And Bring Your Idea To Market At the beginning of 2009, I found myself without a VP of Marketing in a young start-up company and a new product coming out of the door that would radically change the positioning of the company. I had been introduced to Sramana by a VC who said, you have to meet this great lady just to know her. I contacted her to help me redo the positioning of the company. She did an excellent job in a short period of time using her crisp methodology that has now positioned the company for success. There is no better person to write a book on positioning. In this new series, she lays out the requirements for positioning and uses real world people and companies to illustrate her points. She is a no nonsense leader in our industry that must be listened to. Mark B. Hoffman Chairman and CEO, Enquisite; Founder CEO, Sybase; CEO, CommerceOne Too many entrepreneurs allow their passion to drive them to take action rather than to distill their wisdom. This leads many to jump right into building out generic business functions and pursuing generic strategies. What Ive seen over the years is that the most successful entrepreneurs are the ones that pause to deeply understand what market potential they exactly want to unleash. They then set out and test and evolve. Sramana, in her book Positioning: How To Test, Validate, And Bring Your Ideas To Market, provides the critical case studies that highlight how entrepreneurs should continually self-evaluate and refine their ideas. Its a great reference. -Gus Tai General Partner, Trinity Ventures Many start-up companies dissipate precious energy and capital without ever reaching a point of clear market traction. Too often, their failure stems from their inability to operationalize their vision into a compelling value proposition targeted at clearly defined customer segments. Sramana Mitras book Positioning: How To Test, Validate, And Bring Your Idea To Market combines personalized vignettes of passionate entrepreneurs who, through trial, errors and sheer determination, have managed to integrate this important lesson across the defining dimensions of the emerging Web 3.0 environment. Aspiring entrepreneurs and experienced venture capitalists alike will benefit from this compilation of focused interviews and will want to test their own enterprises against the scrutiny of Sramanas probing questions. -Eric Benhamou Chairman 3Com; former CEO, 3Com & Palm; CEO, Benhamou Global Ventures

Chairman 3Com; former CEO, 3Com & Palm; CEO, Benhamou Global Ventures

Prologue Excerpt Epilogue Excerpt Clarify Your Story Excerpt Positioning: How To Test, Validate, And Bring Your Idea To Market Now Available From Amazon Prologue Excerpt: Whatever you do, do not spray and pray. While I devoted Volume Two to bootstrapping and capital efficient entrepreneurship, this volume is specifically focused on the topic of positioning, a discipline entrepreneurs need to master if they have any aspirations of raising money. Even in building a company with limited resources, a crisp positioning is essential to avoid the spray and pray that sucks up resources, while delivering little more than the kiss of death. Professional investors especially venture capitalists demand three things to validate an investment: market, team, and technology. The priority of the three varies. Some prefer a strong team over a well-defined market opportunity. Others put market first. I belong to the latter camp. Too many times have I seen great entrepreneurs beating their heads against markets that simply do not exist; too many times have I seen solutions from great technologists searching for problems to solve. The greatest tool I have found in defining a cost-efficient Go-To-Market (GTM) strategy is segmentation. Tightly segment your market, finding niches where your product or service has immediate applicability and minimum competition, and your chance of success goes up exponentially. Furthermore, positioning needs to be looked at as a holistic effort, spanning not only value proposition, messaging, and competitive strategy, but also pricing and channel implications. If you have a $5,000 product, direct sales are off the table. Imagine having to visit every customer five times to close a $5,000 deal? Not cost-effective. Doesnt make business sense. In this volume everything is about accuracy, about knowing your customer rather than guessing at who they might be. You will hear Matthias Mischke narrow Stardolls focus to girls age 8-18. Siva Kumar focuses TheFind on Internet-savvy women in the 25-45 age group with a household income over $80,000. Later, Jim Heeger explains how PayCycle acquires its small business customers. With similarly crisp segmentation, targeting only those businesses with fewer than 20 employees, PayCycle needed a way to reach clients without high-touch direct selling, or even telesales. Jim offers the how. As you follow the roadmap these case studies offer, notice the commonality of sharp positioning and undeniable success. By analyzing their markets and ecosystems with laser-like accuracy, clearly articulating the exact problem they solve and how their solution differs from the competition, they have gained unfettered access to hungry customers and even hungrier VCs. All by making clear that their market opportunity is no gray area; it is precise, and not so patiently waiting. As for the format of this volume, as before, I have provided case studies and in-depth strategy discussions with experienced entrepreneurs in four broad segments. My choice of segments is based on three key criteria: (a) current and substantial entrepreneurial activity (b) remaining entrepreneurial opportunity, and (c) viability of bootstrapped

entrepreneurship. My goal in choosing these segments is to give you somewhat concrete pointers to where, if you dig, you may find gold.

EJ3 Epilogue Excerpt

Posted on Tuesday, Sep 8th

Positioning: How To Test, Validate, And Bring Your Idea To Market Now Available From Amazon Epilogue Excerpt: If there is one thing that VCs master, it is a refined ability to poke holes in a business plan. I once took a client with over $20 million in profitable annual revenue to Trinity Ventures for financing. Larry Orr, one of Trinitys general partners, dissected the business a semiconductor yield management software company and by the end of the meeting, had sharpened his teeth on what he considered to be an inadequate TAM . He segmented, then sub-segmented the business, establishing that in our assumptions we had mistakenly included a set of unreachable segments. We eventually sold the company to a larger player in the category, without raising further financing. This poking holes, unfortunately, is a skill Ive now mastered as well. Those of you who have attended my strategy roundtables have experienced this first hand. I may have told you straight to your face that your vision is nowhere near 20/20. There is, however, something enormously valuable in this exercise of litmus-testing. Simply: It eliminates bad ideas, and saves months, if not years of your life. In my consulting, I remind people that my job is to help them ask the right questions. If I have achieved that, I have brought them three quarters of the way to the solution. In light of this, you will find in the appendix a set of questions to guide you through this process. Put your idea through this rigor before committing precious years of your life. And, if you have already leaped into the business with both feet, then this rigor will yield something else: strategy. You will learn, if you are truly open, what to avoid, and wherein lie the fastest market penetration opportunities. But be honest. Be brutally honest as you seek answers to the questions. For while optimism is a requirement for entrepreneurial success, fanaticism is a surefire recipe for failure.

Clarify Your Story Excerpt

Posted on Tuesday, Sep 8th

CLARIFY YOUR STORY For Enterprise- and SME-Facing Businesses: This set of questions will help you through the process of testing and validating your idea while building an effective Go-to-Market strategy for a B-to-B venture. Product or Service Value Proposition: What pain does your product/service address? What is the profile of your ideal target customer (company)? What is the profile of your ideal target user (within the target company)? What is your technology? What is the application of this technology? What are some compelling use cases? What is your differentiated, must-have value proposition to this customer? Which market? Which segment? Why? How big is the market? Is it big enough? How do you expand, if not? Should you expand, or should you focus within a niche? What is the usage model of the product? How does the user currently solve the problem in question? Who is the buyer? How strong is the pain? Does the buyer care to solve the users pain? How do you prove your value? Pilot? Free trial for a month? Three months? How long does it take to prove value? Competitive Positioning & Pricing: Who is the competition, and how do you differentiate from them? What are the various classes of products in immediate and related categories? What, of those, compete directly with you? Which ones are likely to move into your space? How do your product features compare with the competitions? Can you compete on the basis of functionality? How does your product pricing compare with the competitions? Can you compete on the basis of price? How do customers and prospects view your offering, vis--vis competition? Do they see you as 1/10 the functionality? 1/5 the functionality? 300% the functionality? What value does the customer see? What are customers willing to pay for your solution? 1/10 the key competitors price? Same price? 200% the price? What price can you charge based on perceived value? What is the ROI for the customer? How long will it take to realize the ROI? Can you offer both better performance and lower price? Whom do you need to partner with to offer a full solution? How do you position win-win deals for partners? Can you turn some of the competition to partners/channel/OEM relationships, so not to go head-to-head?

Sales Cycle & Messaging: What are the top target segments (verticals, size, geography)? What is a typical repeatable sales cycle for each segment? Who is the relevant VITO (Very Important Top Officer)/economic buyer (EB)? What job title does that correspond to within the target company/segment? Who is the technical decision maker (TDM)? What job title? Who is the user? What job title? Who is a likely champion for your solution? What job title? Who can coach you inside an account? How do you gather information required to qualify the lead? Extract the pain? Position the solution? What is your value proposition to the VITO/EB? TDM? User? Champion? Coach? How do you communicate that value in 20 words or less? What pain extraction questions correspond to that value? In other words, if a sales rep gets a relevant stakeholder on the phone, what should she ask? Or, what should she ask in a succinct email, to gain permission for further engagement? Lead Generation & Qualification: What are the top target segments (verticals, size, geography)? What is the best way to generate a list of the target accounts within the segments? What job titles are we after within those accounts? What is the organizational map within the account that maps to the sales cycle? What are the names of the stakeholders who correspond with the economic buyer, the technical decision maker, etc.? What is the pain extraction question/value proposition message if someone with the right job title gets on the phone? What are the criteria for a qualified lead? What lead generation programs do you plan to pursue? Google PPC advertising? E-mail campaigns? Tradeshows? Other forms of online advertising? How do you plan to qualify the leads? Telemarketing? Outsourced? In-house? Sales & Business Development: What is the appropriate channel strategy (direct, OEM, resellers, system integrators, telesales)? Are there channel conflicts? How do you resolve? What is your territory plan and prioritization, based on market segment targets? What paid proof-of-concept/pilot engagement/evaluation framework will get you to a deal within a short time? What are the appropriate sales cycle steps, next steps, and duration breakdown? What is the likelihood of a deal by sales cycle steps? How do you forecast? What are the must-have key target accounts? Why? What do you need to accomplish in those engagements to be able to achieve high leverage for reference selling, proof-points, and metrics? Do you have reference accounts? What is the best strategy to leverage the reference accounts and proof points? How do you build new reference accounts? Who is your target? Why? How do you penetrate,

sell, and demonstrate ROI? Are there must-have channel relationships? What do you need to do to appropriately establish and manage them? What kind of channel discount do you need to provide to enlist the channel to perform on your behalf? Can you get OEM deals that may help you accelerate adoption? Corporate: What is the product roadmap for the company? What is the unifying theme that positions the company and leverages its strengths (technology, product, channel, current customers, references, etc.)? Is there a platform strategy? A point-product strategy? A solution strategy? What holds all these pieces together? How do you position to make it into an integrated big story? What products/pieces need to be repositioned/repackaged to align with the corporate strategy? What is the full story? Is it a powerful, differentiated story that can go beyond a pointproduct/one-trick pony, to become a category leader? What is the category? Do you define a new category, or position within an existing one? What technology/product/channel/media elements need to be introduced/influenced to make it into a larger story? What broad scale industry trends can you impact based on your offering, and how do you position to align with such trends? What is your funding strategy? How do you position, package, and sell? What is your exit strategy? How do you position, package, and sell? Execution Roadmap: What is your next major milestone? Product launch, funding round, exit? What derivative milestones/related projects do you need to accomplish to be able to stay on track and execute on the strategy? What is the project-resource-timeline map tracking to the next milestone? What is the messaging matrix? What is the collateral map, based on the sales process/sales cycle steps? What are the reference account milestones? What is the PR strategy? Do you have the resources to staff all the projects that lead up to the milestones? Who will manage lead sourcing/lead generation/lead qualification? Who will manage the PR process, pitches, follow-ups, etc.? Who will write the collateral? (Web site, sales pitches, data sheets) Who will design and produce the Web site? Who will manage events/tradeshows? What are the key additional hires/timeframe? Does everything align with your operating plan/budget? What tradeoffs do you need to make? What are the prioritization algorithms?

For Consumer-Facing Businesses: This set of questions will help you through the process of testing and validating your idea and building an effective Go-to-Market strategy for a B-to-C venture. Who is your target customer/user? What is the user experience you plan to offer? Does the customer/user care? Why? What is your differentiated value proposition to the customer/user? Which market? Which segment? What demographic? What psychographic? How big is the market? Is it big enough? How do you expand, if not? Do you need to expand, or is staying within the niche desirable? What is the usage model? How does the user currently accomplish the objective? What is the competition, and how do you position against them? What is the business model? On-Demand? Subscription? Advertising CPM? CPC? CPA? Transaction fee fixed? Commission? Final value fee? How do you build traffic? What FREE incentive can you offer to bring users en-masse to your site? What premium service can you offer that users would want to pay for? How much would they pay? What is your context strategy? What is your content strategy? What is your commerce strategy? What is your community strategy? What is your search strategy? What is your personalization strategy? How do you plan to sell ads? Internal ad sales force? Ad networks? Which ones? What kind of ad rates can you command? What ad management system will you use if you do it internally? Are you going to advertise online to recruit customers? Google/Yahoo! PPC? On blogs and other sites? Which sites? Using which ad networks? What are your search engine marketing/search engine optimization strategies? What keywords are you trying to own/position around? How expensive are they? For your category, what are the most influential blogs? How will you get them to talk about you? What are the top mainstream media properties that you need to get written up in? Whom do you need to partner with to offer a full solution/whole product? Whom do you partner with to generate traffic? Under what terms? Do you have a widget strategy for Facebook, iPhone, Hi5, MySpace, etc. to generate traffic and visibility?

Entrepreneurship Education: Idea Validation

Posted on Friday, Mar 19th 2010 Next

Every Thursday morning, I coach five entrepreneurs with many more listening to the sessions. And like a parrot, I keep asking these entrepreneurs to validate their ideas. I give them a framework with which to do so. I give it to them ahead of time hoping they would use it and come prepared. And yet an abysmally low number of them do so, making lack of validation of the business idea the single biggest reason for Infant Entrepreneur Mortality (IEM). It is hugely frustrating. In our recent discussion on what entrepreneurship programs, business schools, and incubators must teach, the issue came up time and again. So, in this thread, I invite you to discuss what your educational program is doing to teach entrepreneurs how to validate their ideas.

The EJ Methodology: How To Check Infant Entrepreneur Mortality

Posted on Thursday, Jan 28th 2010

I would not have believed this had someone just told me so. But based on my roundtables, I have now a reasonable sample of entrepreneurs to do some trend analysis and draw a few conclusions: A good 25% of the entrepreneurs dont bother validating their ideas. If we can simply plug this basic gap, we can enhance their chances of success dramatically. Another 25% is immediately interested in raising money. Again, raising money without validating the business is pretty much impossible, so this is another pattern that I am seeing constantly, and if we can address, has a chance at significantly impacting infant entrepreneur mortality. I have put together a set of slides on the EJ methodology, which I would like you to use as you are either trying to self-teach or are working with entrepreneur groups and entrepreneurs as 1M/1M ambassadors. Ideally, as we build the EDO partnerships, if we can equip the Internal Ambassadors to use these slides and help the entrepreneurs prepare for the roundtables, we can scale this much better. For the roundtables to be productive, I would like entrepreneurs to do their homework before coming to pitch me. And this includes thinking through a strategy for validating your business until it becomes adequately real, not just an idea in your head. Meaning, figure out how you get to paying customers, and come to discuss that strategy with me. I will be happy to help.

Over the last year or more, I have worked with over 75 entrepreneurs, and they are coming to the roundtables with absolute basic questions, almost all of which can be tackled by themselves, or by the Ambassadors pointing them to the appropriate resources as indicated in these slides. If my experience coaching entrepreneurs over the last year is any evidence, just addressing the validating point and the fund raising point are going to add tremendous scalable value to reducing infant entrepreneur mortality. 1M / 1M ambassadors, if you can give me a hand with scaling this portion of the process, I can spend my time tackling the more complex issues next, and also focus on looking for more patterns like these that may also be addressed with scalable solutions.

Entrepreneurship Education: Who Is the Right Seed Investor For You?

Posted on Friday, Jul 16th 2010 Next

I am sure many of you are reading 1M/1M Ambassador Irina Pattersons Seed Capital series where shes interviewing seed investors from various walks of life, and with a diverse set of perspectives. Whereas Mike Maples is interested in the top 15 deals in Silicon Valley each year, Basil Peters likes to invest in businesses that have a quick exit path. This poses questions and options for entrepreneurs: Who is the right seed investor for you? Those of you who attend my roundtables know that I am a strong proponent of target shooting, versus spray and pray, in trying to find customers. Raising money is the same. My philosophy is to identify who is the best fit for my particular business and focus on that person. Note I said person, not firm. The business of venture capital and angel investing is a highly personalized one, and individual rapport, relationship, and expertise are really what are at stake. As you read more of our Seed Capital series, please keep this in mind. The reason were bringing you this in-depth series is to help you get to know these individuals and their preferences. In addition, some of the angels work in groups. We are also bringing you the in-depth details of how these groups operate, how they screen deals, and what their investment criteria happen to be. As you know, our operating procedure in 1M/1M is homework. We worship at the alter of a single god: work ethic. If you have the work ethic, we can teach you how to do the homework and craft your business, block by block. Our Seed Capital series is to help you do your homework better. Enjoy! One thing were hearing continually from angel investors mind you, angel investors, not VCs is that entrepreneurs approach them too early and without adequate preparation. Folks, you cannot (and should not) do this. Once you get rejected by one investor, you will not be able to go back to that same investor anytime soon, unless you have a strong pre-existing relationship with the individual. So dont blow your cartridge too soon and without doing the necessary homework. Just look at the statistics. Angels receive anywhere between 50 and 200 deals a month, and invest in 420 a year. Yes, a year. That means each investor rejects anywhere between 500 and 2,000

or more deals a year. Superangels like Mike Maples get 5,0007,000 deals a year, and they too reject the bulk of their dealflow, investing in just 1215. The bar is high for entrepreneurs to qualify for investment. And you get only one shot with each investor. It is excruciatingly difficult to get an investor meeting, especially for first-time entrepreneurs. If you get one, you should make sure that you are prepared for it. Heres my Clarify Your Story framework. It gives you an idea of the kinds of questions you need to answer to come up with a robust strategy and fine-tune your pitch. If you need to discuss specific issues here, come to our 1M/1M roundtables. Six hundred thousand companies go out of business each year. We dont want you to be one of those. In 1M/1M, our objective is to check the high Infant Entrepreneur Mortality the colossal waste of entrepreneurial energy that we see around us. Take advantage of 1M/1M. As a follow-up to my previous post, The Time Has Come For The College Entrepreneur, a question that begs to be answered is: What is the composition of a youth entrepreneurship course? What are the assumptions that need to be made about what students know? Of course, one of the assumptions needs to be that the student has no business background or business training. Typically, they come from other streams of study and need to take entrepreneurship as a supplemental course. In addition, give the job prospects, we have to also keep in mind the cost of education. Its not reasonable to expect a large number of our unemployed youth to go to expensive business school programs and be saddled with large debt burdens. Entrepreneurship education needs to be imparted quickly, efficiently, and at a minimum cost. Ideally, its on a live project a company a venture that the student has already started tinkering with. I have tried to keep these criteria in mind as I have designed the One Million by One Million (1M/1M) program. I am also curious to hear from educators at high schools and colleges who are coaching and mentoring students facing this deep recession on what, if anything, you are doing to steer them toward entrepreneurship.