I found this list in a very good post from Charlie O’Donnell on his blog This is going to be BIG. I don’t know him, and I didn’t know his site, but on digging I discover he has done time with Union Square Ventures, teaches entrepreneurship and practices what he preaches with a couple of startups that he runs.
But what really matters is that this is a very good list. It matches my dealings with startups and investors, on both sides of the table.
1) Strong sense of the key milestones–Entrepreneurs often ask what metrics they need to get to in order to get an investment. I often turn that question around and get them to tell me what the important milestones are.
In a nutshell: Metrics. Trackability. He adds: “Milestones are a waterfall–and having them as goals should inform product, marketing, financing, etc.” Agreed.
2) Implementation of a product strategy–More so than any other aspect of the business, the thing I see early entrepreneurs tend to drop the ball on most–myself included–is product strategy. I’m not saying you have to know all the answers, but you should at least know what your landing pages are trying to accomplish, where they’re going wrong and what steps you’re taking to identify the solution. I like to know that, even if you haven’t figured everything out, you have a process around product–so this way I can bet that you have the tools to figure it out.
The product road map included, and this gets even more powerful when you add on the milestones in the first point. In the post he adds the practical question, “How do I know you’re not going to spend the whole financing moving the search box around when it turned out that being on mobile was more critical to your success?”
3) A theory on customer acquisition–You may not even have your product out yet, but having a reasonable sense on how people are going to discover it–past the buzz around your launch–is necessary. Just tell me how the first 10,000 users who aren’t your friends find it–and if it’s viral, tell me why people pass it on other than “because there’s an invite friends link.”
And, within that, this very real note about what doesn’t work:
If your strategy is to reach out to all the bloggers in your industry and get them to write about you, that’s pretty much what every other startup is going to do–and anyone who has done it will tell you the results will likely be underwhelming.
So make it real, and also realistic. Don’t just do what everybody else has done.
4) A financing strategy that gets you *somewhere*–When I say *somewhere,* I really mean one of three outcomes: getting critical mass (whatever that is for you) or at a product milestone that makes your venture fundable, starting to get revenues or cash-flow positive. When someone asks you, “What does this money get you?” they really want to know that it gets you to some amount of users, coverage of certain platforms, first enterprise customers, whatever it is. Just something more mission critical than “18 months.”
Notice that it’s not necessarily all the way to the exit strategy. I find this very refreshing, looking at some real next step, and going back to the foundation of metrics and milestones, trackability.
5) Specific value creation –The easiest way to show value creation is to say that each customer is worth X dollars in revenue. Pair that with the cost of customer acquisition and net worth; there’s your business. I don’t care if these are wild-ass guesses–at least make some attempt at showing that at customer N, your business is worth X.
That’s a very nice summary of “value creation.” Units times price.
What I like about this post is that it gets away from the standards I find myself listing too often: exit strategy, differentiation, growth potential, defensibility, management team and so on. This different way of looking at it seems very useful to me.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
