The inner dynamics of a start up…like sands through the hourglass.
I spend a lot of time with start up companies. To be specific, I spend more time with start up companies than I spend with my wife. That is actually true and explains why despite 22+ years of marriage, I think I understand start up companies better than I understand women. With that in mind, I’ve observed and want to share my thoughts about the evolutionary stages that start ups go through as a framework for understanding them better. I think this matters for you as a start up company or, perhaps even more importantly, for you as an advisor to start up companies.
My view is that start up companies, to achieve success, will progress through 4 major stages before departing “early stage” or “start up” status. As with any good rule, no individual company actually follows all these stages, and yet somehow, they all do. I’m calling the four stages the “Four Seasons” because it obviously possesses more flair and lends itself more to a potential book deal. I arrived at the framework for these seasons, as I listened to “The Boston Consulting Group on Strategy” audiobook in my car. I’d actually recommend you get the print version and read it sitting still because concentrating on complex business strategy concepts while working through traffic at 80 mph does tend to challenge the senses…especially while also keeping the blinking light of your blackberry in the corner of your eye. DID THAT JUST BLINK RED?! Stay calm…here are the seasons your start up will flow through:
Spring = Experimentation
Summer = Tactical Execution
Autumn = Operational Organization
Winter = Strategic Maneuvering
We’ll probably take care of these in a couple of separate blog posts. Let’s start with the spring when all is fresh and new, and pollen covered and allergic-reaction-inducing. In terms of a start-up, the spring is the beginning and clearly an experimentation stage.
The Spring of Your Start-Up…Experimentation
When founders found a company, they usually do so, based on several critically flawed notions. The trouble is, you never know which of their assumptions are critically flawed. What we know is that the percentage of your glass that is filled with uncertainties is larger than the percentage filled with certainties. In the spring of your start-up, founders are and should be, probing the boundaries of their assumptions. They are probing their assumptions with regard to technology veracity, customer-base validity and management team, um, virility. I don’t have a clue how long the spring will last for your business. And while spring on planet earth signals warmer mornings and brilliant sunny days, spring in your start up can feel like the winter of your discontent. Customers can inexplicably evaporate. Production costs are twice as high and take twice as long as you hoped. Your business partner decides that full-time wages beats full-time no-wages. You are probing…probing. And you should be. And you should plan for this potentially long season. Spring in a start up can last for years and, like some species of life on earth, start ups can die in the flowering stage.
But the probing goes on for those that last. Elation associated with spring often emerges with the signing of a customer. And then, maybe, another customer. Maybe a third who hires you more for consulting than your product…and in a different industry than the other two, but its a customer. And, OK, so the purchase decision by one of the three was made by a former college roommate who happens to be the VP of something at a business in an industry not targeted by you. But it is real revenue! The beautiful aroma of spring is in the air! Your idea is validated! Several other relationship-based sales prospects are favorably evolving. This all proves your technology has some value. It does NOT prove that you know how to build a business. This is why so many “seed stage” investors really don’t invest in your business until you’ve started securing a series of non-relationship-based sales. They want evidence that your SALES PROCESS works, not just your technology.
The good news is that buds are on the vine. The family members who took a lot of convincing are starting to make eye contact with you again! You’re no longer introducing yourself as a “consultant”, but as a “founder” at Thanksgiving gatherings. Your start up finally got, say, $250,000 in total revenue after 18 hard months! But alas, as with spring on earth, spring in start ups tends to bring with it…rain. It is going to rain. There are a lot of opportunities flowing in…some prospects are finding YOU! Unfortunately, you don’t really know why. What did they search on? What are they searching for? What are they expecting? So much probing and experimenting yet to do. Different messages, different contact approaches, different pricing packages…probe, probe, probe. This is life during spring in a high tech start up.
Put a system in place that allows you to evaluate the successes and failures of your customer probes. I know, this might just be a weekly meeting with your sales person. Not exactly some complex methodology, but build the discipline. Look for trends. Be objective. Be critical. Ask your sales guy to keep better notes and look for trends. Ask your incubator manager what she thinks about the trends you think you see. Probe, probe, probe. Spring is when you begin converting your business concept into a business plan. Summer is coming…in the next post.
Wayne Barz is Manager of Entrepreneurial Services for Ben Franklin Technology Partners of Northeastern Pennsylvania. Follow Wayne’s blog at www.TechonomicMan.com or on Twitter @TechonomicMan.