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Startup essentials

new ideas fail because….

• Insufficient technology validation


• No market for technology
• Poor cultural acumen
• Imbalanced team
• “Valley of Death”
Idea:
1.Is the idea for a new venture clear?
2.Is it Technology Push or Market Pull?
3.If it is Technology Push, why is the technology so interesting?
(an example ? SIGNFICANTLY better than the alternative? )
4.If it is Market Pull, what is the current way they solve the
problem and why would your solution be SIGNFICANTLY better?
5.What hypothesis need to be true for your new venture to
succeed?
6.When would you walk away from this effort?
7.Can you describe a scenario where this would be very exciting
to you?
8.What type of team do you need to execute this?
Team
•Drive
•Entrepreneurial instincts
•Domain knowledge
•Intelligence
•Track record
•Credentials
•Past collaboration
•Shared vision and values
Mistakes young entrepreneurs make
while preparing Business Plan
( courtesy : Fortune magazine)

• You are trapped in the “college bubble”


• You have no prototype.. Or you do, but your users are irrelevant
• You didn’t research the competition
• you haven’t talked to customers
• You didn’t practice your pitch
• You don’t tell a good story
• You know nothing about the investors across the table
• you make stuff up instead of saying “I don’t know”
• you seek confirming, not disconfirming evidence
• You pick advisors who are easily accessible , not particularly relevant
• You hire for short term needs, not long term fit
• You treat fundraising like an end, not a means
• You do more than one Business Plan competition
Customer / Problem / Solution (CPS)
• Who has the problem? (it may be a “customer within the customer…)
• What problem are you trying to solve?
• How are you solving the problem?
• How are they currently dealing with it?
• Why and how is your solution better?
• What benefits do they get in your solution over the
competition? …
Value: An exchange of money for
goods or services
Value Proposition(VP)

Customer
VP

Cost/value
(currency)

Seller
VP

Seller Customer Value to


cost cost Customer
Value Proposition
Why customers buy from you and not your competitor?
• Your solution solves a problem, satisfies a need
• Bundle of products, services, benefits

Value is always judged…


• From the customer’s viewpoint
– Customer’s needs
– Customer’s pains
– Customer’s gain
• As compared to your competition
The Elevator Pitch
• Short explanation
– Chance encounters
– Getting appointments
• The essence of the opportunity
• Focus on value: benefits
Elements of the Elevator Pitch
• The technology and its benefits
– What it is and what it does
– Not how it works
• Product Development status
• The “pain”
– Need and size of market
The Process of Technology Commercialization
Subprocesses: Building the Value of New Technology

>
1.
>
3.
> >
7.
> 9.
5.
Imagine Incubate Promote
Demonstrate Sustain
the dual 2. adoption
4. contextually 6. 8. commercialization
(techno-market) Mobilize to define Mobilize Mobilize
Interest in Mobilize
insight resource products market complimentary
and
for and constituents assets for
endorse-
Demo processes delivery
ment

Commercialize-
> ability
> > > >
Bridges: Mobilizing the Stakeholder

Source: Jolly, Vijay. 1997. From Mind to Market. 11


Market Types
• New product existing market
• New product new market
• Low cost re-segmentation
• Niche re-segmentation
Segment types
• Mass market
• Niche market
• Segmented
• Diversified
• Multiple platforms or markets
Market Segmentation
Eg.: Dell model

Phase 1: Phase 2:
Boil the ocean geography

Phase 3: Phase 4:
customer segment by product
Understanding Risk,Barriers and
Uncertainty
Risk and Uncertainty
Risk Uncertainty
• The situation of winning • No knowledge of future
or losing something events
valuable
• Not measurable,
• Quantifiable and unpredictable
predictable
• Unknown outcomes
• Known potential
• Beyond control
outcomes
• Cannot be minimized
• Controllable with proper
measures • Not possible to assign
probabilities
• Can be minimized Eg.:
• Can assign probabilities Demand risk
Technology risk
Execution risk
Financing risk
Types of Risks and Barriers
• Technology / Product
• Product
• Intellectual Property
• Market / Marketing (“reputation”)
• Manufacturing / Distribution / Supply
• Regulatory
• Management/Business
Major risks facing start-ups are commercial
Strategies
• Define and understand the business model
• Start small
• Conduct conscious experiments
• Convert fixed costs to variable costs
• Manage the nature and timing of
commitments
• Stage financing
• Stay flexible
Competition
Categories of Dimensions of
Competition Competition
• Existing • Technology
– Direct • Intellectual property
– Indirect • Product features
– Status quo • Whole product
• Future • Market presence
Competitive Advantage
The unique features of a company and its products that the
target market perceives as significant and superior to the
competition

Sources of Competitive Advantage


• Cost
• Product or service differentiation
• Niche strategies
• Relationships!
Competitive Matrix

• Identify key attributes (customer-validated!)


• Rate products: yours AND those of competitors
Competitive Matrix: Example
Duoderm, Silver Impreg. BioEngineered Becaplermin/
Attribute Centis HBOT NPT
Aquaform Dressing Skin Regranex

Easy of Use

Healing

Surgeon /
Hospital

Treatment
(Weeks)
6+ 10+ 10+ 12+ 6+ 6+ 10+

Safety

Cost USD 35 1,500+ 1,500+ 50,000+ 60,00+ 10,000 3,000+

Brand
Recognition

Courtesy : Phytospecialities Pvt. Ltd., Chennai ( portfolio company, XLr8AP)


Validation

Technology
Experts
Industry Regulatory
Experts Experts
Report
compiled
From all
round Prospective
opinion Manufacturers,
Competitors Integrators,
Distributors &
Investors
Prospective Licensees,
Customers, End Users

23
Customers
• Individually
– Individual consumers, businesses, etc.
– Needs
– Characteristics
• In aggregate: markets
– Segments
– Targets
– Characteristics
Customer Segments

• Groups of customers who


– Have common needs/problems/characteristics
and/or behaviors
– Will respond similarly to a marketing action
• Why think about customers?
– Focus resources on opportunities that match
your unique capabilities
– Decide who NOT to serve and why not
Venture creation
Nobody will invest in a venture unless
it has
• great management
• great proven market
• great product and revenue
Venture Creation is a process…..

Much like a manufacturing process,


Venture Creation turns raw material (e.g. technology)
into finished product (e.g. fundable venture).

GAP

TECHNOLOGY INCUBATOR ANGEL CAPITAL VENTURE CAPITAL

Venture creation
STEPS FOR STARTING A NEW VENTURE

1. Prepare yourself.
2. Create idea.
3. Research, research, and more research to size potential
4. Create your business plan with business techniques.
5. Gather needed resources.
6. Prepare STP(Segmentation Target Positioning) strategy
for your business.
7. Get the finances in shape
8. Launch marketing and brand awareness campaigns.
9. Product followings and development.
10.Set future goals (which may be to either scrap or modify)
Financing Challenges

• Start-up companies lack track record and have


few assets
• Little leverage or credibility
• Whims of financial industry
• Do you want to give up ownership?
Financial Model

• How will you


– Generate revenue?
– Create shareholder value?
• How much will you generate?
• How quickly will you do it?
Match Your Business Model

• To the opportunity
• To financial resources
• To the capabilities of the team
• To the needs of the investor(s)
Influencing Factors

• Location on commercialization continuum


• Responsible entity to raise funds
• Costs to be funded
• Business model
• Organization and plan
• Realistic amount to move to next stage
• Realistic amount to complete entire process
Primary Types of Funding
Bootstrapping
• Sources: Revenues, personal funds, friends and family
• Requires quick path to positive cash flow
• Business model must match
• Limits pace of growth
• Advantages
– Easiest (relatively) to obtain
– Avoids venture capital and early-stage dilution
– Imposes discipline
Debt
• Loan of fixed sum for a specified period for a given interest rate.
• Limited upside
• Investor criteria
-Low-risk
-Hard assets
-Steady, predictable cash-flow
Equity
• Long-term ownership stake in exchange for capital
• Significant upside potential
• Significant costs
- High rate of return, as much as 50% - 75%
- Long-term ownership interest
- Monitoring and control issues
• Investors can bring expertise and contacts
Investor Types
• Debt
– Banks
– Friends and family
• Equity
– Angel investors
– Venture capitalists
– Strategic investors
Other Sources of Funding

• Crowdfunding
• Government grants and loans
• Tax credits
• Foundations
• Sales and Service contract revenue