5-4-3-2-1 Countdown for Entrepreneurs (7/14/22)
5
Tactics for startups to win more while risking less
Old rules for startups are under attack. For example, founders are discovering that they can make more progress with less funding.
Tell me if this sounds familiar:1. Find a problem you think is worth solving. 2. MVP a solution as quickly as you can. 3. Achieve “Product-Market” fit. 4. Grow like crazy.
And what happens BETWEEN steps often looks like this -- 1 to 2: Raise some pre-seed money. 2 to 3: Raise more seed capital. 3 to 4: Raise Series A funding. And once you pass step 4...Unicorn here we come.
While this approach has produced success stories, it’s also resulted in a huge number of failures because it introduces so much risk. If a team runs into trouble moving step to step, often because of fundraising challenges, progress and opportunity can fall apart.
I’m excited about an alternative. Armed with fresh tools and tactics, I’ve seen startups…
1. Extract market insights with more speed and evidence
2. Accumulate more validation with far less funding
3. Generate product-market fit BEFORE building
4. Drive giant adoption in narrow market
5. Replicate that traction for scale
By executing 1 through 5, a startup can win more while risking less. My new MAP Method helps founders achieve this. I’ll share more about it in future newsletters.
4
Steps to improve your fundraising pitch
Here’s an exercise that can improve your next startup pitch.
Step 1) PROBLEM
Talk about the problem for 3 minutes straight. This should include details like:
- Who, specifically, faces this challenge
- What they are doing (and spending) to solve it today
- How well (or not well) those solutions are working out
Step 2) SOLUTION
Describe your solution in 2 minutes or less. Forcing yourself to do this in so little time will feel hard. That’s the whole point. Give it a go. Pro Tip: Trim everything that doesn’t directly speak to the problem as you described it.
Step 3) FIT
Spend 1 min on why your solution is uniquely positioned to solve this specific problem for this targeted market. If step 2 felt hard, then this might feel impossible, but it’s OK. Don’t get hung up on the clock.
Step 4) PROPOSITION
Distill your Unique Value Proposition (UVP) down to one sentence. What defines your product or service as distinct and valuable for the target market?
All four of these steps can help you achieve clarity and confidence for a presentation. The ratio of time for the steps (3 minutes, 2 minutes, 1 minute, 1 sentence) doesn’t have to be exact, BUT... If you can’t spend the most time on the problem, you likely don’t understand it well enough. If your solution description runs long, you’re getting too deep in the weeds. If you can’t describe “fit” concisely, you don’t truly know the market. And if you can’t distill your UVP concept, you’re not ready to discuss possible marketing.
But if your problem → solution → fit → proposition is compelling, I bet your next pitch will really deliver.
3
Questions to ask yourself before giving out equity
Startup founders should be very careful when sharing equity. I’ve seen plenty of ventures passing it out like candy. But it’s a scarce resource — so treat it that way.
In the earliest days of a startup, every resource is tight. And nothing feels more scarce than cash. So, when a hire, advisor, or vendor is willing to take equity, their offer seems nearly impossible to refuse. Big potential progress for little or no cash — what’s not to like? Well, a lot. Aside from your time, equity is your most valuable asset.
Before giving up equity, ask yourself 3 questions:
1. If you had cash, would you still pay with equity?
2. Are this person’s responsibilities explicitly defined?
3. Can you clearly measure the value of those contributions?
Unless you can answer a resounding *yes* to each, think twice about sharing your pie.
2
Ways to identify an “Affinity Angel”
All angel investors are not created equal. When it comes to your startup’s first money in, find yourself an “Affinity Angel.”
When raising your startup’s first outside investment, you’re likely looking to individual angel investors or possibly some angel groups. But within the angel universe, there’s a pocket that could serve you best: Affinity Angels.
I define an Affinity Angel as an individual investor who fits two criteria:
1) Much of their career and success (financial or otherwise) came from one particular industry, area of focus, or type of technology.
2) This investor’s “area of affinity” perfectly overlaps with you and your venture.
To be clear, if a venture isn’t fundable, no amount of affinity will turn an investor’s “no” into a “yes.” But assuming your venture has merit, an Affinity Angel is an optimal first investor for three reasons:
A) Their knowledge and connections in your space will be greater and more valuable than most other investors.
B) If you succeed and positively impact a space they really care about, they benefit beyond a cash return. This can translate into more favorable terms for you.
C) Their experience will allow them to make a “go/no go” decision about you with more speed and clarity. Whether a yes or no, this saves you times and effort.
So, as you try to close your first round of investment, don’t be the only one answering some questions. Press angels to see just how deep their affinity runs.
1
Thought about a leader’s vision
“A team aligned behind a vision will move mountains. Sell them on your roadmap and don’t compromise — care about the details, the fit and finish.”
- Kevin Rose, Founder of Digg, and Partner at Google
Stay safe, stay happy, stay in touch!
Adam
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