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Rick Rasmussen - Product First and Foremost - Startup AddVenture Eastern Europe 2015
The document discusses the transition from an outsourcing business to a product-based company, emphasizing the importance of understanding market needs and the risks involved in such a shift. It outlines the essential elements for building a successful product company, including identifying unmet needs, scalable business models, and maintaining focus amid potential distractions. The document also highlights the need for a strong financial and operational strategy and cultural awareness in order to succeed globally.
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Rick Rasmussen - Product First and Foremost - Startup AddVenture Eastern Europe 2015
- 1. RICK RASMUSSEN CONCORDIA VENTURES PRODUCTFIRST AND FOREMOST (VS. ACCIDENTAL PRODUCT) #STARTUPADDVENTURE
- 2. Outsourcing ! Product •Building your outsourcing business • Finding a product opportunity • Oops – this is harder than I thought • Planning and prep to build a great product company
- 3. Outsourcing / ContractWork • Low capital requirements • Hiring Talented Engineers • Finding customers with revenue generating projects • New and repeat business. People Revenue
- 4. Leading outsourcing economies G20 India Russia China Canada Brazil Mid-sizeEconomies Pakistan Ukraine Spain Netherlands Ireland Developing Economies Armenia Czech Republic Romania Poland Hungary Estonia Source: Cybermedia
- 5. Outsourcing CEO Admin Sales Engineer EngineerEngineer Engineer Engineer Engineer More revenue? Just add more engineers (minus overhead, efficiency, etc).) Maximum revenue per year is limited to: (number of consultants) x (hours worked per year) x (billing rate)
- 6. Issue: Scale People • Businessscales with number of engineers • Can only grow by adding people • No revenue leverage Revenue People
- 7. ACME Industries Custom Telecom Project Custom Datacom Custom Security Custom CRM Custom CRM • MediumRsized*“workRforRhire”*software* firm* •Good*engineering*talent* • Average*size*project*is*$20k* • All*trained*by*the*best*local*schools*
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- 13. Oh Look… CommonRequirements • Let’s become a product company…!!! • Paying customers • Our development is leveraged – Use existing code – Multiply and go • Happens all the time..!
- 14. What’s wrong withthis? • An Accidental Product • Little thought about – Market size – Customer needs – Support requirements – Marketing and Sales
- 15. Product-based Business • Workson principles of leverage – “Develop once, sell many” • Starts with a tested Unmet Need and large potential market • Risk capital funding used to develop and deliver product or service High risk and potentially high reward
- 16. Product-based businesses areScalable • Requires cash to get started • Business scales as a function of marketing and sales • Suffer through the Valley of Death
- 17. Product Company CEO Admin Sales MarketingEngineering Operations Finance • Functional Organization • Potential to scale and leverage resources • Can be much higher revenue per employee
- 18. Do your homework– are you ready? • Unmet Need identified • MVP built, tested against market • Sustainable and repeatable sales cycle • Large global market waiting for you? Customer Discovery Customer Validation Customer Creation Company Building
- 19. If Yes….. It’stime to go ALL IN!
- 20. Risks: Management Distraction •Management needs to run one company, not two • Your business needs your focus • Split into two
- 21. Risks: Cultural Rift •Product people are the stars • Contractor people view themselves as slugs • Bring a small team over. Do it only once.
- 22. Risks: Cash Flow People Revenues Plus Mayequal negative cash flow Not good for either business
- 23. Unprepared Startups getstuck Here
- 24. Form a Spin-Off NewProduct Company Outside Investors Contract Company • Management • Funding • IP
- 25. Do Your Projections •Account for everything needed Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 5% Revenues Product Line 1 $314 $1250 $4000 $8000 $10500 18.8% Product Line 2 $4 $375 $1500 $5000 $40000 71.4% Srvcs & Maint $35 $750 $2250 $3500 $5500 9.8% Total Revenue $353 $2375 $7750 $16500 $56000 100% Cost of Sales $265 $1125 $3700 $8350 $25700 45.9% Gross Income $88 $1250 $4050 $8150 $30300 54.1% Expenses R&D $411 2269 2538 2806 3443 6.1% S&M $237 1659 1732 1610 1842 3.3% G&A $162 1647 1940 2196 2281 4.1% Other $65 360 485 600 765 1.4% Net Income (787) (4685) (2645) 938 21969 39.2%
- 26. File as aDelaware C Corp • Establishes your desire to be a global company • Able to attract stronger interest from investors • OK to operate out of home country as long as it makes sense – Lower labor costs – Stable workforce • Speak with an attorney about tax and IP considerations
- 27. Build a GreatProduct Team • Investors • Board of Directors • Co-founders • Your executive staff • Board of Advisors (optional) • Service Providers – Attorneys, Accountants, Recruiters, PR firms, Outsourcers… Investors Board You Co-founders Advisors Exec Staff Team Service Providers
- 28. Build a FullCompany Timeline Q3Q1 Q2 Q7Q6 Q8 Cash Flow Positive Series B $7M Started company MVP Full Production Q9 Series A $2M Second prototype Closed Beta1st alliance signed Seed $100K Q4 Q5 Employees: 4 6 9 10 11 14 18 22 24 Q10 1M Users
- 29. Build a GlobalSales Strategy Bootstrap Revenues/seed Series A/B exit Early- Vangelists CEO Selling Sales Channel Strategy Customer Validation Through Completion Hire first Sales Persons Full Product And Company Launch Multiple Channels Strong Growth
- 30. Bring on aStrong Financial Team Bootstrap Revenues/seed Series A/B exit CPA setup You or part-time bookkeeper CPA and Attorney Review Full-time Bookkeeper or Controller Controller and Part-Time CFO Hire CFO
- 31. Put systems inplace to grow globally • Engineering – Choose the right language platform(s) – Strong testing methodology – Outsourcing only with great specifications – Great GUI and multi-language support • Marketing – Messages for each geography • Sales – Global distribution strategy • Operations: – Mindful of costs and multiple supply sources
- 32. Be mindful ofGlobal Cultures Lewis Model of Cross-Cultural Communication
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- 35. International Selling Product and Features Relationship 7meetings Family, formal Family, trust Cost, speed, opportunisticHistory, connections Culture is so important to know and understand
- 36. Conclusions • Think likea product company from day one • Separate product from contracting/outsourcing – Personnel – People – Customers • Be mindful of cultures and attitudes • Go Global right from the start
- 37. Don’t build yourproduct on a bad foundation Plan on being global. Project forward. Build a solid foundation
- 38. Even castles madeof sand fall into the sea, eventually – Jimi Hendrix Plan…! Otherwise,