10 steps to launching an early stage company
I won’t say who sent me this document from Ignition Partners though I am fairly certain that it is not considered secretive. Some curious readers may find it interesting. This is an Ignition Partner’s (Jonathan Roberts) perspective on how to launch a company successfully.
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Ten Steps to Launching an Early Stage Company
In general, Ignition companies follow the following ten step plan to success:
1) Determine your main value-add.
• What is it that you’re good at?
• Where is your unique advantage? Focus on that and build from there.
• When thinking about your initial offering don’t over reach. If the first phase of your business plan is too broad by definition you’ll end up doing things you don’t understand very well. There are lots of inherent risks in doing new things. When you are new you often don’t know what you don’t know. It’s fine to have a vision of where you do want to go, but it’s important to have a very pragmatic starting point.
• Who are you like? Best way to figure out who you are is to triangulate with what you are replacing and who you are like. Windows was replacing MS DOS based applications and was like the Mac. People understood it as something that makes your PC into a Mac. This allowed us to very clearly position it as something that “made PC’s easier to use”. I’ve had other companies position themselves as the “Oracle of Unstructured Data” or the “Salesforce.com for Recruiters”. Anyway, it allows you to more clearly figure out who you are and who you are not.
• A winning strategy has the following components: a) A great vision; b ) Place to start to day; c ) A plan to scale between the two. You should think through your strategy in this order.
2) Evaluate the market and determine who your customer is and what they want to buy.
• Understand. Try to make it something they already understand versus something new you’d like them to consider.
• Need versus nice to have. A “need to have” is something that you are already planning to buy and all that you have to do is convince them to switch vendors or more than like take on an additional vendor.
• A “nice to have” is when you are trying to educate and convince somebody to buy something they are not buying presently or solve a need that they don’t currently have.
• In terms of who the customer is, you need to go beyond simply identifying the companies or organizations that buy, but who specifically in the organization that buys.
3) Determine your competitive strategy. How do you fit with in the context of the marketplace? What “play” should you run? Are you a trying to win a drag race or execute a fast follower play? Are you trying to pincer a competitor between an advanced or basic offering? You don’t need to start from scratch. There aren’t a million choices. There are only five based on how you assess the overall market landscape.
4) Determine your positioning. Why your version of the solution is this situation is better than anyone else’s? Translate this into messaging that your target audience find both easy to understand and memorable. Finally, roll all of this up into a case for your company or product based on the situation in the market that makes your product or company necessary. See the fourth bullet point on point number 1. Usually it is easiest to start with the man on the street positioning and double back on the “X that does Y for Z” construct. My favorite focus group question is to ask a customer, how do you describe this product or service to a friend?
5) Identify the key trends you’re going to exploit. The way for a new product or service to displace an established service is to align with trends that are bigger than any one company. Major trends in technology include the exploding power of the micro-processor, the pc economy, and internet standards. In each instance the large established players resisted the trends and were either displaced or had to adapt to them.
6) Produce the product or a proto-type of the product at minimal cost and sell it to a few select customers. You’ll learn a ton along the way. You’ll validate your proposition and your target customer. You’ll also get a much better understanding of your profit structure.
7) Fully deploy with a handful of customers. In other words, it is better to have one really good customer than three folks who are simply sampling your goods or services. The reason is that when you are a new company potential customers will want to call existing customers before they buy. It is really, really hard to scale a business if you don’t have reference-able customers.
Acquire the next handful of customers primarily through word of mouth. In other words, ask your first happy customer to refer you to three others. Make them happy.
9) Use PR and momentum to project your product, offering, or company into the market. In other words, win the thought leadership battle. If you’ve aligned with key trends in the marketplace, have happy customers, and are showing momentum you should be able to convince key influencers that your product’s success is inevitable. If you’ve done this right than customers will start believing it is “when” and not “if”. You than need to create the perception of overwhelming momentum so that you play to both the motivations of greed (e.g. the desire to get a head of their competition) and fear (the anxiety about being left behind).
10) Scale. Here is where you have a Web Site, tighten up your product positioning, find additional partners ect. The key thing is to keep your cost structure low until you are ready to scale. At this point you should have a good sense of what your revenue is before you spend the dollars. Most new entrepreneurs try to scale too early before they really figure out what they are selling and who they are selling to. They spend a bunch of dollars on the front end and ironically it actually hurts their ability to refocus their business towards a better outcome.