8.7 years<br />The average time to liquidity for a venture-backed startup nowadays is 8.7 years. <br />
“…Of the 26 companies that I consider successes, 17 of them made complete transformations or partial transformations of their businesses between the time we invested and the time we sold. <br />That means there a 2/3 chance you’ll have to significantly reinvent your business between the time you take a venture capital investment and when you exit your business.” <br /> -Fred Wilson, <br /> Union Square Ventures<br />
"I've lately started to realize that our most successful companies are led by entrepreneurs who have a unique talent -- they are heat seeking missiles. <br />It doesn't matter where the missile is aimed pre-launch... " <br />(Josh Kopelman, First Round Capital)<br />
"Markets really matter. Because the bigger the market, the more targets there are for the missile to hit. I've seen many companies fail to reach their potential because -- despite the skill of the founders -- they ultimately realize that there just aren't enough (or any) big targets for them to lock-onto. " <br />(Josh Kopelman, First Round Capital)<br />
Idea Sniff Test #1:How easy is the “Version 1.0” of the idea?<br />
MVP(Minimum Viable Product)<br />The smallest thing you can launch that proves or disproves your initial theory about your market.<br /><ul><li>Survey
Customer acquisition?“Step #1, word of mouth and PR. That’ll get us funding. Then we can buy advertising!”<br />
Building a good product is a ticket to the “real” game of startups. Finding and retaining customers.<br />First 18-24 <br />months<br />The rest of your 8.7 years.<br />
Idea Sniff Test #2:Is there a good ratio of revenue per customer (ARPU) and cost of customer acquisition?<br />
Selling Software (Enterprise, SMB, “prosumer”)<br /><ul><li>Telephone sales or field sales? You can’t afford a salesperson at lower price points.
Google Adwords (SEM) or other CPC or CPM advertising
Channel sales (Agents, brokers, dealers, distributors, partners, resellers, retailers)</li></li></ul><li>Selling software isn’t (just) a meritocracy!<br /><ul><li>SuccessFactors spends a ripping 56 cents for each dollar of revenue they bring in. Salesforce is spending almost as much: 54 cents to bring in a dollar for which the analysts expect 44% growth.</li></li></ul><li>Consumer marketing<br /><ul><li>SEO
Does the user obviously benefit by linking to you?
Social/Viral - Does the user obviously benefit by inviting friends and family to the service?
If you have to advertise to get traffic to your ad-supported site, that’s not a good sign.</li></li></ul><li>Idea Sniff Test #3:how deeply could you imagine impacting the life of your target customer?<br />
Startups are easier/cheaper to build than ever before.*<br />* On the minus side.... Zillions of them are trying to get at the same customers you are.<br />
100 die-hard customers... What do you need to do next?<br />