Startup 101

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Some of the lessons learned after 15 years in software startup market

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Startup 101

  1. 1. Startup 101 SOME ACCUMULATED LESSONS Demian Entrekin Oakland, CA
  2. 2. Believe & Doubt – how to straddle the gap Perhaps the toughest discipline of all is to move back and forth between deep belief in Believe your project, and a Doubt sincere willingness to doubt your data and your assumptions
  3. 3. Focus Pocus – pick a path  Small teams have this advantage: the ability to focus on a very tight target– that’s how they win.  Keep narrowing your focus until you believe you can identify, reach, engage and differentiate.  Be different, not better. Better is a dead end.  You can’t climb the mountain face in one move – find a single crease and go one foothold at a time.  Keep looking for alternate paths in case the one you’re on does not go all the way  “If you don't let go, you can't fall off!” Jerry Moffat
  4. 4. Funding – open your eyes Liquidation Preference by Series  The bar keeps getting higher with time, so be careful who you sign up with or get it right the first time.  You will be working closely with your investors for a long time, so make sure that it can keep working.
  5. 5. Finanicals – cash cash cash  Revenue matters, but cash flow matters more than revenue – much more  You can’t make payroll with revenue – you make payroll with cash  Revenue matters once you get to a certain level of critical mass for your industry  For many companies, that’s somewhere around $5M Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cash 2,500,000 2,250,000 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 (250,000) Cash Flow (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) (250,000) :-(( N :-| :-| ;-) ;-) ;-) ;-) :-) :-) :-) :-( Payroll Manager
  6. 6. Risks – look in the mirror Strengths Strengths Strengths CEO Weaknesses Weaknesses Weaknesses Blind spots Blind spots Blind spots Risk Category Key Players Key Players Key Players Internal to Company Broken Stuff Broken Stuff Broken Stuff Financial Plan Financial Plan Financial Plan Macro Market Macro Market Macro Market External to Company Micro Market Micro Market Micro Market Competition Competition Competition Pre Revenue Pre-Profit Post-Profit Time
  7. 7. Roles – collaborate but know your positions Stage Concept Pre Revenue Pre Profit Profit/Growth Liquidity Situation: highly fluid, no Situation: version 1.0 done, early Situation: Close customer Situation: vision defined, product Situation: Investors want to infrastructure, no solutions, no adopters, differentiation, sales engagement, competition, development, go to market realize their returns resources tactics differentation, sales CEO/Founder 1. Concept Identification & validation 1. Team building (Fi, Svc, ops, etc.) 1. Board management 1. Board management 1. Corporate development 2. Hypothesis development & testing 2. Board management 2. Tactical selling 2. Partner management 2. Stock price optimization 3. ROM Financial modeling 3. Cash management 3. Customer life cycle 3. Revenue optimization 3. Board management 4. The Vision (The Problem) 4. Partner management 4. Market segmentation 4. Profit optimization 5. Hire CTO & VP Sales 5. Vision validation 5. Cash management 5. Process improvement 6 .Fund Raising 6. Scope management 6. Incent and Inspire 6. New opportunities 7. Company Formation 7. Corporate positioning 7. Pricing validation 7. Governance 8. Executive Level Selling 8. Advisory board management 8. Economic model adjustments 8. Risk management 9. Board formation 9. The Mission 9. Fund raising 10. Advisory Board formation 10. Focus focus focus 11. Business Plan CTO 1. Architecture and Design 1. Team development 1. SDLC optimization 1. Tuning 1. IP optimization 2. Concept Modeling 2. Development standards 2 Competitive advantage 2. Quality measurement 3. Market research 3. Core stack design decisions 3. Monitoring and SLA 3. Risk management 4. Hire VP engineering 4. Development methodology 4. Tuning and performance 4. Thought leadership 5. Idea to Launch Process 5. IP development 5. Vendor management 5. Competitive advantage 6. COGS VP Sales 1. Partner Identification 1. Sales Process 1. Sales metrics 1. Channel expansion 2. Partner management 2. Sales Model (Inside vs. Channel) 2. CRM and customer lifecycle 2. Partner development 3. Executive Level Selling 3. High Skill/Will Talent recruiting 3. Reference-ability 3. Hiring and managing leaders 4. Concept validation 4. Compensation planning 4. Lead-to-close process 4. Lead-to-close optimization 5. Sales model (inside, outside, etc.) 5. Partner management 5. Channel Development VP Marketing 1. Corporate positioning 1. Campaign management 1. Campaign management 2. Differentiation 2. Public relations 2. Public relations 3. Campaign Planning 3. Analyst relations 3. Analyst relations 4. Product positioning 4. Product marketing 4. Product marketing 5. Vertical content development 5. Lead gen cost effectiveness 6. Channel Support CFO 1. Cash management 1. Cash management 1. Negotiations 2. DSO 2. DSO 2. Stock price optimization 3. Banking and debt 3. Banking and debt 3. Financial Leverage 4. Fund raising 4. Fund raising 5. GAAP basics 5. GAAP basics 6. Contract management 6. Contract management
  8. 8. Development Process – do your homework Analysis Need Problem Definition Scope paralysis is a figment of the Specs imagination. Prototyping Research I’ve seen plenty Build of political paralysis, but most folks skip Test the analysis Requirements JAD Sessions part and pay a Deploy heavy price later.
  9. 9. Concept Sales – partner for pain  Early stage sales is concept sales – find fearless allies who will take risks for personal gain  The first five sales are the hardest so don’t waste your time on dead ends and happy talk  Make sure you have domain expertise to gain trust and credibility before you open your mouth  Just because someone will buy what you are selling doesn’t mean they are a good customer  Point the organization toward a repeatable sale as fast as you can

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