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10 Common Assumptions Entrepreneurs Make That Kill Their Ventures: De-Risking Your Ideas and Increasing Your Chances of Success
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10 Common Assumptions Entrepreneurs Make That Kill Their Ventures: De-Risking Your Ideas and Increasing Your Chances of Success

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Steve Barsh, a partner in DreamIt Ventures in Philadelphia, will be giving a very fast-paced, information-packed talk at IDC on 30 December. Steve will speak about the very common mistakes he sees......

Steve Barsh, a partner in DreamIt Ventures in Philadelphia, will be giving a very fast-paced, information-packed talk at IDC on 30 December. Steve will speak about the very common mistakes he sees many entrepreneurs make regarding assumptions in their business models, not realizing they are making assumptions, how those assumptions are often deadly, and most importantly, how to de-risk those assumptions in a very quick and capital-efficient manner.

If you are building out a business plan for a new venture, expanding an existing company, creating a new product, or meeting with VC investors to pitch for funding, this will be a presentation you won’t want to miss.

As well, Steve will be speaking briefly about DreamIt Ventures. DreamIt will once again be providing 12 teams with up to $30,000 in funding and will have the companies relocate for June – August 2009 to Philadelphia. During the 3 month program the teams will receive the DreamIt funding as well as: an experienced 1 on 1 mentor; office space with furniture and Internet connectivity; legal and accounting services from some of the best firms in Philadelphia; a weekly speaker series where expert speakers cover tricks and traps in marketing, technology, product development, software architecture, venture capital, etc.; and all of the software that Microsoft offers.

Steve’s talk will last for approximately 45 minutes with 15 minutes of Q&A.

Steve is a serial entrepreneur who has worked in high tech businesses for over 20 years. As well, Steve teaches part time in the Wharton MBA program, is a partner in DreamIt Ventures, and provides high-impact consulting and advisory work to help CEO’s build and expand great companies. To learn more about Steve click here. To learn more about DreamIt Ventures, click here.

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  • 1. 10 Common Assumptions Entrepreneurs Make That Kill Their Ventures: De-Risking Your Ideas and Increasing Your Chances of Success v3.0 December 2008 Presented at IDC, Herzliya, Israel Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh
  • 2. Premises & Observations
    • Pitch for money too early
    • Look for validation from investors
    • Business based on 3 – 7 key assumptions
    • Spend more time de-risking the idea
      • Before pitching
      • Before building or finishing the product
    • Have trouble
      • Identifying risks
      • Coming up with out of box ideas on how to de-risk the risks
    stevebarsh.com
  • 3. Stop Waving, Start Pointing! “Show me, don’t tell me.” stevebarsh.com
  • 4.
    • Team
    • Product development
    • Competition
    • Market size
    • Customer / market demand
    • Pricing
    • Sales cycle
    • Capital plan
    • Exit value
    • Execution
    • Marketing
    stevebarsh.com
  • 5. Risks
    • Assumptions = risks
    • Risk
      • Something in the future that you…
        • Think
        • Estimate
        • Forecast
        • Hope
      • … is going to happen, and you could be wrong
    • “ Being wrong” could be very bad
    • Large class of risks are numbers
      • Assert a fact
      • But, it’s not a fact, it’s an assumption
    stevebarsh.com
  • 6. How do you identify a risk?
    • Many of your documents are full of risks and assumptions
    • Look at your
      • Plans
      • Presentations
      • Pitches
      • Financial models
      • Forecasts
      • Estimates
      • Things with numbers or graphs
    • Underline / circle anything that you are not 100% sure of
    • What did you learn in your earliest science classes?
    stevebarsh.com
  • 7. Experiment / Test! stevebarsh.com
    • Hypotheses you are trying to prove
    • Valid experiments to prove or disprove
    • Valid proxy you can use
      • So, it’s / were just like ____
      • Be ready to defend
  • 8. De-Risking Goals
    • Be capital efficient
      • Consume intellectual capital before venture capital
      • Convert assumptions into knowledge at the lowest cost and as early as possible
    • Think outside the box
      • Set up “experiments” to lower risk and prove (or disprove!) your hypotheses
      • NITMOI
    stevebarsh.com
  • 9. Risk Types & De-Risking Approaches - 1 stevebarsh.com Management / team VC’s: Team! Team! Team!
    • Demonstrate that you are
      • Thoughtful
      • Creative
      • Problem solver
      • Coachable
      • Can build a team
      • Ask for help
      • Can serpentine
      • Deliver product
      • Sell, sell, sell!
      • Take input
      • Flexible
      • Focused
      • Not defensive
      • Execute
      • Concerned with team DNA
      • Have a PMA
  • 10. Risk Types & De-Risking Approaches - 2 stevebarsh.com Product development
    • Release early and often  get market feedback
    • Confidence-based estimating (CBE)
    Competition
    • Do good SWOT’s (QuickMBA.com)
    • Know & monitor: competitors and market space
      • Track on Google Alerts (N|B|W|V|G)
      • Track on Twitter/Summize (RSS)
      • Google Advanced Search on FileType XLS, PPT, DOC and include the word “confidential”
      • Search on slideshare.net
    • What’s the plan when competitors emerge?
    • Talk to past failures
  • 11. Risk Types & De-Risking Approaches - 3 stevebarsh.com Market size
    • Define your market segment (or segmentation)
    • Total addressable market (and geographic region)
    • Cite your data!
    • Calculate bottom up, not top down (e.g, “ if only 1% of $xxx million, we are sitting on a $___ opportunity”)
    Customer / market demand
    • Test on Google Adwords
    • Sell / talk to potential customers EARLY!
      • CHEAT! -- LinkedIn. Your University!
      • Find out their REAL problems
      • Urgency?
      • Addressing the problem today?
      • Definition of a qualified lead?
      • What are they willing to pay?
      • Confirm your features, benefits, and differentiation are aligned with what will motivate them to buy or use
      • Figure out the OBSTACLES TO SALE (so if you had it today, would they buy it immediately and start using it? How would that work? CBE it!)
      • BTW, potential funding source?
  • 12. Risk Types & De-Risking Approaches - 4 stevebarsh.com Pricing
    • Market comps
    • Test on Google Adwords
    • Ask potential customers
    Sales cycle
    • Break out the step by step and go through it bottom up.
    • Sell / talk to potential customers EARLY!
      • How long sales will take
      • Process that will work
      • How much a sale will cost
    Capital plan
    • Rounds, valuation, valuation drivers
    • Careful about pricing yourself out by setting too high a valuation too early!
    • Are you “VC fundable?” Do you hit their “magic ratios?”
  • 13. Risk Types & De-Risking Approaches - 5 stevebarsh.com Exit value
    • Think through – what will drive your company’s value?
      • Revenue $?
      • Net $?
      • Users?
      • Customers?
      • Uniques?
      • Engagement?
      • Slope of the curve?
    • Comps, and why they serve as a proxy for you
    • Public company comps (if applicable)
    Execution
    • Plans / goals / milestones
      • Show previous
      • Think through alignment
      • Show your real grade (hey, MS is late!)
      • Show how you are getting better
  • 14. Risk Types & De-Risking Approaches - 6 stevebarsh.com Marketing
    • Can you get to your market efficiently?
      • Test on Adwords
        • Positioning works? Tune it!
        • Differentiation compelling?
        • Conversion rates?
        • Costs?
      • Survey Monkey
    • Cost of customer acquisition?
    • Customer churn? How do you know?
    • Other thoughts
      • Blogs
      • PR (key messages, outlets, etc.)
      • Tradeshows
      • Advertisements (online | offline) – did you test?
  • 15. Risk, VC’s, and Pitching
    • Don’t wave your hands, point!
    • Don’t be a know it all
    • Show humility
    • Show what you know, and and what you have de-risked
    • Ask VC’s what risks they see
    • Ask the VC: What would I need to do / show you to get you to invest?
    stevebarsh.com
  • 16. Premises & Observations
    • Pitch for money too early
    • Look for validation from investors
    • Business based on 3 – 7 key assumptions
    • Spend more time de-risking the idea
      • Before pitching
      • Before building or finishing the product
    • Have trouble
      • Identifying risks
      • Coming up with out of box ideas on how to de-risk the risks
    stevebarsh.com
  • 17.
    • DreamIt Ventures is a pre-seed business accelerator that provides startups with the capital, expertise, mentorship, and guidance they need to succeed.
  • 18. What We Offer Entrepreneurs Apply January 2009! dreamitventures.com
  • 19. 2008 Buzz
    • Considered among top-3 business accelerator
    • 76 Technorati citations
    • Increased Alexa ratings for rank, reach and views
    • Syndicated coverage for DIV and companies
  • 20. 10 Common Assumptions Entrepreneurs Make That Kill Their Ventures: De-Risking Your Ideas and Increasing Your Chances of Success v3.0 December 2008 Presented at IDC, Herzliya, Israel Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh