Product + Market + Team = Deal

The three dimensions that makes or breaks every startup.

Every startup begins with the founders’ idea about how to bring a better product or service to a given market. The team’s success depends on how the they find product-market fit and beat their competitors. The process sounds straightforward but it is challenging and fraught with failure. Having been foolish enough to found 3 companies (and invest in many more) I’ll attempt to help you fall down fewer mine shafts than I did.

Unless you’re independently wealthy, you’re going to need to raise angel and venture capital to build your company. Finding angel and venture investors requires balanced company development on three axes:

Product, Market & Team

The key is developing your company in a balanced step-by-step approach along three axes.

The starting place is your team who must develop, produce and deliver the product (or service). The founders lead here, and must be qualified and motivated (equity!) for the years of work ahead. Focus on filling the holes in your team and never settling for an “OK” hire. It is always (always…) better to wait than to hire a B player.

Phase 1: Once the nuclear team is in place, it’s time for a business plan (and pitch-deck) that addresses all areas of corporate development in a step-by-step way:

• Determine market need, size & sectors, competition and what’s missing today.
• Product (or service) description, USP and killer features (and associated IP) and how you beat the competition
• Team: why your team is the right one to prevail at this opportunity.
• Details are competitor analysis & how / where you win, sales & marketing channels with metrics (if you can’t measure it, you can’t improve it) including customer acquisition cost & customer lifetime value.
• Financial and financing plans: how much $ are required for each stage
• Qualified advisors and directors: It’s difficult to see the picture if you’re inside the frame. (credit: Eugene Kleiner.)
• Exit plan! It’s all about the exit: how, who and how much. (i.e. comps.)

Step 2: Getting an investor pitch…

Networking is key to get in front of the RIGHT investors. Learn who invests in your sector and at your stage. Sites like Crunchbase can help here. Work every room, conference and contact you have to get intros, go to conferences (even virtual ones).

The pitch is where the rubber meets the road and Guy Kawasaki set the standard for the best pitch deck. It’s short because VCs will mentally make a go / no-go decision within 10 minutes. If you have a killer demo, do it as soon as you have set the context. Finally, review the financials and questions. Be prepared to answer questions and focus on the issues the investor wants to understand.

Have the right materials to follow up:

• A GREAT web site, demo, and a one-pager pitch (not in 8 point font), along with a full plan.
• LinkedIn bios for the team focusing on how qualified they are for this opportunity
• Crunchbase and Pitchbook listings for your company
• Zoom Pro so you aren’t cut off after 40 minutes… (not pro…)

Step 3: Congratulations, you secured an angel investment! Now the hard part begins: building enough value to secure a Series A venture investment

• Product: paying customers of your version 1 product or service
• Market: testing customer acquisition strategies and initial PR
• Team: fill the talent gaps in your team and build sales & marketing
• Intellectual property filings (e.g. patents) to protect your secret sauce
• Retain a startup-oriented law firm to help with the legal documents
• Start banking with a startup-focused bank such as SVB or First Republic. These banks will support you with venture debt and other facilities once you have a couple of years of revenue track record
• Lastly (and perhaps most importantly) spend at least one full day together developing a set of Mission, Vision & Values (MVV) and a Diversity Plan that your team aims to exemplify. This will help future hires understand and contribute to the company’s ethos

Step 4: Congratulations again — you built enough value to secure a Series A. We at Startup Capital Ventures would love to hear from you! This is where things change more than since your company’s founding days. For the first time, you’ll be recruiting mostly strangers vs. mostly people you’ve known. Staff may grow from 6–8 people to 25 fairly quickly.

You’ll have administrators (e.g. finance & HR), specialists, and managers so the company will no longer be essentially a“flat” handful of people. This changes the culture of the company from almost a “family” to an actual company with an org. chart. Reinforcing and exemplifying your Mission Vision & Values will help your culture weather challenging times.

If things continue to go according to plan, you’re now on your way to scaling your vision into later stage company. Good luck!