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fastStart New Ventures

fastStart New Ventures



In this presentation I’ll walk you through a program we’ve been deploying with emerging companies called fastStart.



It is based on the idea that the primary focus of the new venture is to get the right product to market at the right time. 

It is less about time-to-market pressure and more about using the invested capital wisely, especially now, where the problem tends to be one of “time-to-running-out-of-money” rather than simply time-to-market.



Most new ventures fail, in our experience, because they produce the wrong product--late. The wrong product because they are not close to the customer and late because they lack an “execution system” to focus the team.  



Evolution of a Technology Start-up

"Get real or go home"

We were at a client today (16 October 2008) and saw this presentation (Download CEO_ALL_HANDS.pdf), presented last week by Sequoia Capital at Sand Hill Road in Palo Alto to the CEO's of their portfolio companies.

It lays out how we got into the current financial crisis and what they (Sequoia) see going forward.

Slides 46 and 47 are very interesting (presented here) -- this is the net-net of Sequoia's advice to their CEO's... But this is what companies should be doing anyway, regardless of an evaporating capital market. This has been our business for the past 20 years.

Too bad that it takes crisis to create focus!

There is more on the meeting at Brian Combs.com. And another interesting article by Michael Arrington, Benchmark Capital Advises Startups To Conserve Capital, Look For Opportunities. And yet another one.

Where to focus when resources are limited?

We were presented with the problem of how to ensure the next round of funding for a Cleantech start-up and then how to accelerate their path to positive cash flow.

The problem statement we outlined with them looked like this...

• Focus on the top market segment, select 5 beta sites (early field trials) from this segment, narrow-down the product definition to meet only the requirements of these segments (assumes this focus results in an accelerated development schedule), get the first $5M in sales. Do this by Q2 XXXX. 

• Then start Phase 2; the wider market penetration program with the second generation, more fully-featured product.

Five critical questions to help focus a start-up:

1. If you could only go after one market segment what would that be?

2. Who would your top five potential customers be in this segment?

3. What are less than eight key customer needs for those five customers?

4. For this segment and these five customers, what is the minimum product configuration (i.e. list the features) that would get you a sale?

5. Would this targeted-defeatured-product take less time to develop and qualify? What is the schedule impact?

We used decision modeling to answer these questions and focus the team. They used these models to verify their VOC assumptions with the beta site customers, further reinforcing the buying drivers from the customer perspective and quantifying the value proposition for the future product.

Links  | STRUCTURING A GROUP DECISION MODEL USING AHP 

Performance to schedule - or the lack of it - is a (before-the-fact) indicator of future financial performance

Recently, in a discussion with a Venture Capitalist about why it was so hard for them to get performance to schedule information from their portfolio companies I made the comment that "it would be like running a business without a balance sheet and an income statement..."

Performance to schedule - or the lack of it - is a before-the-fact indicator of future financial performance (i.e. cost of delay) as well as cultural competency and organizational discipline. Financial reporting is after-the-fact information. Investors need to know - in advance of the financial report - how things are going so that they can intervene to either prevent or mitigate a potential $ loss.

Yet VC's routinely don't require start-ups to provide accurate and timely schedule data similar to the way they require accurate and timely financial statements. Why not?

Being fast and being popular usually aren't compatible

View Bill Walsh youtube interview

We're often criticized (rightly so) for not being very "popular." Someone recently told me they were "concerned about our mixed popularity" with their clients, which I thought was a polite way to put it.

Well all I can say is, being fast and being popular usually aren't compatible. If people spent less time making other people "feel good" then maybe more companies would be meeting expectations and not generating negative cash flow.

The goal needs to be winning, not making people feel good. In fact when you push teams, like we do, they don't feel good, but they get results. When they get results they feel good, in that order. There is of course a majority voice out there that thinks this idea is stupid and wrong, that in fact happy people generate happy results.

The San Francisco 49ers of the 1980's under the late Bill Walsh's leadership were a great example of the "results first, then feel good second" philosophy. He once told my friend Alan Rush that he didn't care if his team got along with him or each other because winning (through detailed and rigorous planning and execution) would solve these "relationship issues." Alan gained these insights during his doctoral work at Stanford where he interviewed and studied how great leaders (like Walsh and others) took advise and council.

How a venture fund prioritized potential investments

We've been working with a large European venture fund to determine their optimal portfolio of investment opportunities. View an animation of the process we used (on a hypothetical example... of course).

The modeling concept is based on the work we have been doing prioritizing strategy, markets, customers, product requirements, and new product project portfolios. It is based on the idea that these decisions are influenced by objectives or decision criteria.

Defining the criteria and the weighted values of the criteria is critical to understanding how the decision model behaves and the factors that influence ranking priority. The basis for this modeling algorithm is AHP (Analytical Hierarchy Process), which has a long history in practice.

The idea is that you have limited resources and you need to get the biggest "bang for the buck" out of your investments; and the question is "where should you spend your money to get the greatest return in the shortest time frame?" Same problem is true if you were a CEO trying to determine your optimal product portfolio.

So it is a natural extension to apply this same thinking to investment portfolios in which you have the same problem of funds allocations. In this case, it was a question of where to put the investors money and which decisions will result in the greatest benefit (based on the business objectives of the venture fund).