Startup Under the Spotlight – Knowing What’s What
We take our seats and wait expectantly. She takes a breath and starts her presentation.
Our speaker, Yonit, heads a startup that develops applications in the Industry 4.0 environment. She is today presenting the product to a forum of senior people from the industry, who’ve convened at my invitation to hear about the project and give her their feedback.
Around the table (well, across a Zoom screen if truth be told), the knowledge accumulated over many decades is evident. We’ll tap into it to take Yonit forward to the next step in the development of her product.
For almost two hours the forum members put forward questions, ideas and insights. It was instructive and intriguing.
As the topics on that table are relevant to so many, I thought it might be useful to share with you some of what came up.
A new venture certainly benefits from a dynamic business environment, but an abundance of competitors in the field may also turn such an ecosystem into a disadvantage.
The pitch you prepare must be suited to the person you’re talking to. Everyone has a different need and so you must tailor the offering specifically to that person.
The [potential investor or] client’s time is expensive, and their money is in limited supply, so do remain totally focused and quickly get to the listener’s pain points.
This may come as a surprise (or not...), but investors rarely invest in an idea. Or even in technology.
Above all, investors invest in people. The start-up team must be a strong and impressive one and who they are, must be transparent! It’s vital that you introduce the key team members and their capabilities in your presentation.
This is critical when trying to raise funding for your startup.
Focus - Investors
Investors tend to avoid investing in startups that present numerous directions and capabilities. They will try to avoid them. If your venture is a fledgling one, it is best to focus solely on the most important and most interesting point and present that.
But how can you know if you have focused sufficiently on the key point? Quite simply: ‘put it in a nutshell’ – you need to trim it down until you can describe the company and the idea in one clear, short sentence and make sure that the potential customer or investor understands exactly what it is you’re talking about. If you’re not there yet – keep working on that focus!
Questions that interest investors
How do you translate what you’re doing into money? What is the value of a typical customer? (Make sure to apply this to the segments where you choose to operate).
What would it cost to implement the product in a factory of a certain size at a defined economic value?
How do you see your go-to-market (GTM) strategy? What business and marketing plans do you have for the domestic and international markets?
How does the technology work?
The level of investment
As an entrepreneur, you need to justify the level of investment you are asking of the investors. With very few exceptions, investors will want to understand what the money will be used for, and over what period of time.
Talk to them in numbers, including:
A plan to raise capital where the money will suffice for at least 18 months and, in times of crisis (such as in our current coronavirus times), for up to 24 months.
A forecast that shows which milestones your venture will reach, as a company, at the end of these two years.
Investors don’t like investing in “marketing”. They see it as money thrown away. It is therefore recommended that most capital raising requirements focus on development, product, human resources, acquisition of initial customers, etc. Not in marketing.
Burning the cash
Focus is also required since a startup employing people can burn a lot of money in a short time.
Marketing and Business Focus
It’s important to focus on two or three defined sectors or organizational profiles when explaining your potential market/business environment. This is because customers in diverse sectors will have different needs.
Product diversification – i.e., casting the net too wide, means you’re unlikely to catch anything. Focus is the means to developing expertise.
It’s important to create a focused story adapted to customer needs.
If your pitch covers too much ground, you’re at risk of losing the listener along the way.
Key Questions and Analyses
Who is the customer?
What is the market?
Who are you approaching? Prioritizing customers.
In which industries do they embrace the technology? And in which don’t they?
Analyses of the addressable market (top-down) and market share ( bottom-up). These analyses will help you gain an understanding of the market as well as of customer prioritizing, the stages to market penetration, the cost of acquiring each customer, and the likely sales or revenue potential from the customers acquired.
The answers to these questions will have an effect on your GTM strategy and on business volume.
Who do you approach?
We recommend you gain an understanding of whom to contact (at the personnel level) in each company you approach – in some companies it may be the CEO who promotes new technologies.
Whereas at other companies the head of engineering may be responsible for sourcing new technologies.
In presentations (to investors and customers alike), we recommend using case studies on customers you’ve worked with, including project KPIs. How do you quantify success in working with the system?
Beyond the implementation of the product at the technological level, you will also need to clarify the question: What do customers stand to gain from using the product?
It is important to analyze, understand, and present:
What key value does your venture offer?
For which pain or need does the venture provide a solution?
What is this worth (in money terms) to the customer?
The Competition Map
The key question: What is the competitive advantage of the venture?
Added value may arise from technological proficiencies or unique patents.
Added value may arise from a high level of specialization in a particular sector.
Your presentation should always include a competition map of the key players, and show in a graph or matrix the position of the competitors, where your position would be and, above all, why they should invest in you…
Fine-tuning the Offering and Mapping the Competition
If you diverge by offering a variety of solutions, you’re more likely to be exposed to tougher competition on a number of fronts.
By focusing on a niche, you’ll be able to better study the competition map, and be the best in your defined area.
A product or a service-oriented application?
Application developers tend to add more and more developments and/or features. In business terms, this equates to burning more cash.
As part of the focusing process, it’s important to conduct internal testing of the developments already made so as to consolidate the functions.
Only then can one analyze and formulate an idea, product, service or technology that has more product-like characteristics and that will work in a more defined and restricted environment, making the activity an easier one.
Implementation of the product
What process is required to apply the product in a factory or in an organization?
Obviously, diverse start-ups experience the market in a different manner.
However, the points I’ve summarized here are the common denominator to a great many ventures:
The team is the most important aspect of any start-up. Investors ‘place their bets’ on people above all else.
Focus is the key. It was raised in many aspects during our session by all group members.
It is essential to meet investors only when you have full information on your market, including estimates of numbers and a solid understanding of market dynamics and the competition map.
From your competitive landscape analyses, you’ll be able to identify the Unique Selling Point that will help you take your venture and your product forward.
If you’d like to learn about your ecosystem (market, customers, competitors, and more), I’d be pleased to assist you.