What does startup success look like to you? Perhaps you are involved in a startup or own a small or mid-sized business. You are inventing a new manufacturing capability or technical offering for introduction into the market space. You probably are actively pursuing investors. If you are chasing Angel, Venture Capital or Private Equity investors, you are pitching your value proposition.
How successful is that pitch of yours? It may determine your startup success.
How sustainable is your value proposition? You know, value proposition: the tangible benefit that customers and investors receive from making the choice to do business with you and your company or startup.
Before you create one more value proposition, consider your strategy for how you plan to utilize your relationships with investors and customers. This critical element of your business strategy can mean the difference between whether or not the folks with the money perceive you as a wise investment.
I work with student-run and mature startups. I work with mature companies who may be (literally) retooling and recalibrating a new technology arsenal. What I see time and time again is a startup success pitch strategy that targets investor-funding as THE only objective.
It’s not a free pass to free money.
For biopharma, where there are lengthy research phases involved, OK. Acquisition or licensing is the exit strategy. But for Apps? Platforms? Services? Small businesses?
In these latter scenarios, a solid strategy and process for early-customer acquisition is missing. Somewhere along the line, the message has been delivered to the entrepreneurial community that it’s all about being able to tell your friends and family that you have investors. Which means you are entering into debt service and working to achieve profit for someone else’s company.
Perhaps your target should be selling products/services/platforms to customers who are willing to transact business (you know, give you money) for them. I know this sounds old-fashioned. It’s the way business has been done for a long, long time. It’s the basis of a sustainable startup value proposition. It’s startup success.
I’ve written posts about selling, and how that S-E-L-L word makes startup founders squirm in their seats. How can you found a business and not understand why customers (not just investors) would want to invest in your deliverables? That’s not the road to startup success. That’s not the road to a sustainable value proposition.
Carly Fiorina, in a recent interview with the WSJ, talked about various levels of “success” in entrepreneurship. She mentioned that many entrepreneurs define success as getting funded, getting acquired, and flipping the company. Ms. Fiorina talks about a higher level of success: getting the product and company going and selling something to someone. She calls this a “sustainable value proposition.”
Perhaps that’s why so many startups want to be acquired or have their technology licensed as quickly as possible. Founders don’t want to be required to transact business. Selling’s beneath their dignity and college degrees. That’s where their pitches to investors fall very short.
That’s where they shortchange themselves on what could have been a very nice payday.
The most sustainable value proposition you can pitch to prospective investors walks the talk about how you and your co-founders plan on acquiring your first customers, and continuing to develop customers. That’s startup success.
The most sustainable value proposition involves how you want to build your company slowly in a few niche marketplaces by actually selling to people who are willing to pay you for your offering. The most sustainable value proposition you can pitch to investors is when you bring two years of accounting which clearly demonstrates that you and your company are very capable of acquiring and retaining customers. In fact, what you are now asking your investors for is a series of funding which allows you to expand. In that scenario, the investors are more than likely coming to you.
Perhaps that’s why we are getting very good at creating lots of entrepreneurs. We are falling short at creating entrepreneurs who are developing sustainable startups.
What do you think? How can we do this better?
Babette N. Ten Haken, Founder & President of Sales Aerobics for Engineers®, LLC, brings entrepreneurial mojo and business- and revenue-producing collaboration and communication tools to small and mid-sized businesses and startups.