Your startup needs to do EVERYTHING: Raise money, build a team, develop a product/service, sell to customers, build the admin infrastructure to support it all…
It’s hard to prioritize when you don’t even know everything that ought to be done. That’s why I created this horrible acronym: ASAP EFF PP
The letters make more sense in this order: FEAPS PAFP… Fundraise, Execute, Accelerators, Pitch, Sales, Partnerships, Admin, Foundations and Pivot.
- Fundraise: Get the money you’ll need to execute. In approximate order approach Co-Founders, Friends & Family, Crowdfunding Sites, Angels, VC’s, Strategic investors, and eventually other financial investors (PE Fund, IPO, Corporate Buyer, etc). You’re unlikely to be effective until you have a solid business plan, a strong team, a persuasive pitch, and “traction”.
- Execute: Get your product to market. Tool your factory, release your beta, deliver to your crowdfunding backers, get on the app store and/or on store shelves, and generally move things forward on delivering whatever you sell.
- Accelerators & Incubators: These are programs or organizations that help young startups with “seed stage” challenges, from getting legal/accounting/IT resources in place to applying for patents, and connecting to mentors in the right industries. Some take equity, others support themselves with government and corporate grants. Examples are Y Combinator & SOSV in USA and Cyberport in HK. There are also many government programs to support young businesses, though many require copious paperwork.
- Pitch: You need a few versions of your “pitch” to impress different audiences. At minimum, you need a sales pitch for prospective customers & distributors, an investor pitch for fundraising, and a hyper-efficient “elevator pitch” that gets your foot in the door in 30-60 seconds. You may also prepare some targeted pitches for specialized audiences, including specific industries, governmental authorities, or environmental causes. There are also formal pitch competitions like Startup Launchpad (Full disclosure: We won!) and Startup Express (We won this too!) in Hong Kong. These competitions are great publicity with prospective customers and investors, and the prize money is a great non-dilutive source of capital.
- Sales: You have no business if you have no customers. Finding customers is crucial. If you manage to close deals, you have “traction”, i.e., actual revenue coming in, plus proof that your business model works. If you cannot close any deals, figure out why ASAP and address the issues immediately.
- Partnerships: Very few startups can go it alone from scratch. You may need outside factories, big names for co-branding deals, distributors, complementary products, or even exclusivity arrangements. These partnerships and JV’s can accelerate your time to market cost-efficiently. More importantly, the right partners can keep corporate giants from squashing you like a bug.
- Admin, Infrastructure & Planning: Successful founders think “outside the box”. But even the most brilliant companies fail unless they also sort out the issues “inside the box” – Business plan, financial model, accounting system, legal structure, airtight contracts, data security, compliance with all tax / employment / trade / other laws & reports. The last thing you want is a major fine, product recall, lawsuit, patent invalidation, or other avoidable disasters.
- Fix the Foundations: Do you have the right team? Are your investors going to be supportive or problematic? Have all of your contracts been made with the right legal entities? Are there any other “old” problems that can come back to bite you? The downside will grow if you put off dealing with these issues.
- Pivot: The right path is rarely a straight line forward from day one. Business is too dynamic. Technology evolves rapidly, competitors change tactics, new entrants challenge your model, cool opportunities and JV partners become available, and some of your early plans don’t work out as anticipated. Adaptability is probably the most important advantage startups have over the corporate giants. There are no large revenue streams to resist cannibalization, no entrenched interests to push back against strategy changes, and no sclerotic approval processes to inhibit innovation. However, pivots still come at a high cost, even in a startup. A smart pivot is calculated and decisive, taking the young firm in a better direction, executing a better business plan (in terms of cost, sales, risk, compliance, valuation, time to market, efficiency, etc).
That’s only a partial list of “to dos”. But how should you prioritize between them? Options:
- Firefighting: Focus on whatever is most urgent. Emergency doctors call this “triage”. No money? Fundraise. No success fundraising? Work on your pitch. Pitch still not working? Figure out why not and focus on that. This is a low-strategy, high-stress approach.
- Utopia: Do everything simultaneously. Start with a team that already has outside-the-box creators, inside-the-box experts at admin & IT issues, fundraisers, business developers and salespeople, with a few of your top people working within an accelerator/incubator. The sheer amount of resources required make this approach nearly impossible. There is no way to compensate such a large team without greatly diluting founders’ equity stake… Unless…
- Unicorn: These magical creatures quickly find themselves worth over $1 billion USD. A unicorn combines a great business model in the right market with the right team, and mixes it with a set of backers that believe so strongly in the potential that money is practically conjured out of thin air… Investors pay full price for a large future company that barely exists today. The cash then used to build the company and catch up to investor expectations. Upside: This is definitely the right approach if it’s possible for your business. Downside: Your company probably doesn’t have the right DNA to ever become a unicorn. Few do.
- Optimize: This is the best strategy by default. You’re not a unicorn, you can’t do everything, and perpetual crisis management will burn you out. Therefore, find balance. Your product/service needs to be great. You need enough cash to finance >6 months of “runway”, otherwise financing will become distracting. You need to fix the big issues that will kill your business (e.g. flagrant patent infringement, lawsuits, compliance). From there, it’s about balance. There’s no hard and fast “80/20” rule, but it’s still a good guideline. You have precious few resources, but you can use them effectively.
Your pitch is your ticket into accelerators & incubators. Your pitching success will get you noticed by investors and JV partners. Your seed stage capital should finance the business plan, projections and “data room” that institutions will require before investing. You have some time to sort out your issues and get the details right. Nobody expects perfection (except a few regulators).
Assemble a team that can make progress on several fronts simultaneously. Stay ahead of the firefighting. You’ll get where you want to be, whether valuation, sales, or other metrics.
Of course you really might be an undiscovered baby unicorn. If so, please hire me now. I’ll take my compensation in equity.