Monthly Archives: October 2013

Why You Need a Business Plan Writer

Business Plan Writer from The Startup Garage

Why You Need a Business Plan Writer

So you want to get your business off to a great start and know you need a business plan. You may have started to research what is included in the business plan to start the writing process yourself. Writing the plan yourself may be an option you can consider if you have great written communication skills and know how to put together the document effectively. Yet, there are many benefits to hiring a business plan writer that you may not have already thought of. Here are the main points to consider:

Save Time: A professional writer who has experience writing business plans will definitely decrease the learning curve considerably since their knowledge of what is included in a plan will help guide the process of putting it together, including both the gathering of information and writing of the plan itself. A savvy entrepreneur knows how to focus his time on those things at which he excels and outsource those things that he lacks the skill and expertise to efficiently complete. If you have never written a business plan before and writing is not your area of expertise, you might want to consider allowing a professional to help you with this important task.

Improve Focus: Instead of spending the time to learn how to put a business plan together, you could allow a professional writer to help you save time and have a higher quality document as a result. Not only are you saving a significant amount of time, you are also benefiting greatly from that writer’s knowledge and ability to focus the plan on the essential details of the business you are developing. Writing the business plan yourself without knowing how to focus specifically on each individual topic that is typically included can lead to a document that appears to be scattered and unorganized. This is not the impression you want to make on potential funders, if you are using the business plan to gain investments in your business.

Maintain Focus: In addition, when the writer interviews you to gather the necessary information to be able to write the plan, the conversation itself could be an important part of the process of having it completed. Having an experienced business writer discuss the details with you can help you see if there are areas of weakness in your business model or concept. For example, if you are unfamiliar with the most cutting-edge marketing techniques needed to promote your business, this will become apparent as you attempt to discuss this particular part of the business plan. This will help you to also see any gaps or unaddressed areas of your business concept which may need more work before you are ready to launch your business.

Benefit from Writer’s Experience: The business plan writer may also have some suggestions for you that will be written into the plan to help you gain some direction on these particular issues. This outside perspective can prove to be very valuable to you. Many business plan writers who have written many plans will often include their knowledge of various topics into the plan to help give you some ideas on how to approach certain aspects of running the business, should there be any weak areas. It is almost like receiving a consultation with a business profession in addition to getting a solid business plan for your money.

By now you can see that hiring a business plan writer could be a critical decision that will result not only in the production of an excellent plan but will also help you gain some needed insight into the operation of your business. It can point out where you might need some additional thought and perhaps some outside help in order to make your business launch ultimately successful. Only you know your own level of knowledge and ability in writing your own plan. However, if you want to benefit from an outside perspective, hiring a business plan can be the most important decision you make in this endeavor.

I Get By (Funding) With A Little Help From My Friends (and Family)

Friends and Family Funding Help from The Startup Garage

I Get By (Funding) With A Little Help From My Friends (and Family)

One of the most daunting challenges when starting a business is raising start-up capital. Finding and securing the cash will take careful research, good negotiating skills, and, above all, an unflagging commitment to launching your new business. Begin your capital search within your current network of friends and family. A good business plan is necessary every time you approach investors and lenders. As funding rounds get larger and larger, the business plan needs to evolve with additional information, financial projections, and key performance metrics.

Unless your friends and family are professional investors, they probably don’t want to read a 50-page business plan. More likely, they’ll prefer to sit down over coffee and hear you explain your idea. To avoid being too informal, draw up a five- to 10-page document that sums up what you want to do, how you’ll do it and what you’ll apply the money toward. Such a summary ensures you’ve made important disclosures, such as the key challenges, risks and competition the business faces, and that your backers understand what their money is going toward. You should also be able to cite some of the risks for friends and family to give funds such as the possible length of time to get the money back, a possible business failure, and long-term growth prospects.

Key Elements of a Friends and Family Business Plan

1 Page Product Description

The objective of the Product Description is to clearly explain what products or services your business will offer. The information provided in this section will become the basis of your Marketing Plan. You should never assume that your product will sell itself, include a comprehensive description of the product using specifics and detailed language. It should be written so that the reader can easily understand what the product is and what it does. The Product Description should also compare your product to other similar products on the market. This gives you the opportunity to clearly define what advantages your product has over the competition, as well as to address any weaknesses that you may need to improve upon.

Basic Marketing Plan

1. Target Market

  • Geographic segmentations
  • Demographic/socioeconomic segmentation (gender, age, income, occupation, education, household size, and stage in the family life cycle)
  • Psychographic segmentation (similar attitudes, values, and lifestyles)
  • Behavioral segmentation (occasions, degree of loyalty)
  • Product-related segmentation (relationship to a product)

2. Positioning Statement

The secret to defining what makes your business different is to understand what your ideal client really wants and make sure you deliver it better than anyone else. What do you uniquely offer that your clients find amazing? Do you:

  •    Find simpler ways of doing things?
  •    Serve a niche market better than anyone else?
  •    Bring a new perspective to challenges that offer unique solutions?
  •    Package your services in a way that appeals to your ideal client?
  •    Create systems that help clients learn how to do things more effectively?

3. Price Strategy

  • Market skimming: If you’re the only product in the market or have a highly differentiated proposition but can only supply a small proportion of the market then a marketing skimming strategy is often best. This allows you to maximize profitability and use your high pricing to limit demand.
  • Market penetration: Companies usually adopt a penetration pricing approach because they want to grab market share. However penetration pricing requires an iron-grip on costs and efficiency as it is often only with economies of scale that the product becomes profitable.
  • Competitor matching: This pricing strategy results in propositions that are priced at similar levels to the competition. This strategy can be most appropriate where markets are only growing slowly or not at all.

4. Distribution

  • What is the most convenient means for customers to obtain the products or services they want?
  • What is the specific level of customer service standard required?
  • What is the most cost-efficient way of providing accessibility and service?
  • How many customers are there, where are they located, what is their average transaction value?
  • What structures do your competitors use and how efficient are they?

5. Sales and Promotion Strategies

  • Blogging / guest blogging
  • Social media marketing
  • Content Marketing
  • Search engine marketing
  • Event marketing
  • News / media /Public Relations
  • PPC advertising

6. Market Research

  • Interviews (either by telephone or face-to-face)
  • Online surveys and questionnaires
  • AdWords
  • Focus groups gathering a sampling of potential clients or customers

Want To Learn More?

ebook-capital-raising-from-fff
Download our free Raising Capital From Friends, Family & Founders eBook.This book overviews best practices for raising money from the first people you go to — your family, friends & founders. Dealing with money in personal relationships can get a bit tricky. This guide will cover fundamental concepts, legal issues and material you’ll need. It will help prepare you for the difficult conversations and in some cases enable you to avoid them altogether.

 

Raising Capital to Get Easier – SEC Crowdfunding Proposal

SEC Ban Lift on Crowdfunding from The Startup Garage

Raising Capital to Get Easier – SEC Crowdfunding Proposal

SEC Crowdfunding Proposal

In September of this year, the SEC voted to overturn the ban on “general solicitation” that made it illegal for companies to publicly advertise that they are raising capital. While the lifting of the ban did open the private market to a broader pool of investors, it left many restrictions on the types of investors that companies could target and regulations on how to raise crowdfunding capital.
On October 23rd, the SEC unanimously voted on a proposal that makes it even easier for small business to raise capital from a wider range of potential investors while providing additional investment opportunities for investors. The new proposal, which is open for public comment for the next 90 days, outlines the rules for equity crowdfunding and the limitations companies face when offering and selling securities through crowdfunding.

Crowdfunding Proposed Rules

The proposed rules allow all individuals – not just accredited investors – to invest in companies via crowdfunding subject to certain thresholds.  The rules also limit the amount of money a company can raise, require companies to disclose certain information about their offers, and create a regulatory framework for the crowdfunding portals or intermediaries that facilitate the transactions.  More specifically, under the proposed rules:

  • A company can raise a maximum of $1M through crowdfunding in a 12 month period.
  • Investors are permitted to invest up to $2,000 or 5% of their annual income or net worth, whichever is greater, if their annual income and net worth are less than $100,000.
  • Investors are permitted to invest up to 10% of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000.

While there are additional rules in the proposal about the types of companies that are eligible to use the crowdfunding exemption, the major rule change under this proposal is the ability for companies to openly solicit and acquire funds from unaccredited investors.

Another major rule change is that companies and crowdfunding portals are not required to verify compliance with these restrictions.  Rather, investors are required to disclose their income or net worth a means of determining compliance.

The proposal appears to offer great promise for providing capital to small business, but it is important for investors – especially the mom and pop investors – to understand the risk associated with these investments.  It is for this reasons that startups were traditionally mandated to raise capital solely from accredited investors who inherently understand this risk.

 

Why You Should Plan for Niche Domination

Find A Niche Business Planning from The Startup Garage

Why You Should Plan for Niche Domination

Plan for Niche Domination

What is all this dialogue about “Niches” and who should really care? Why should your next business plan focus on finding and developing a niche?

Seldom do two people from the same discipline (sales, marketing, research, etc.) define niches the same way or agree to the value of pursuing the domination of a niche (if the idea ever comes up).

If defining the niche is hard, let’s define “domination” and see what kind of agreement we get there.

In the Science of “Revenue Generation” to develop a “Revenue Strategy,” you must answer 5 foundation questions.  Question number three is “What is the niche or niches you plan to (or do) dominate?”

4 Reasons To Dominate a Niche

To have a successful Revenue Strategy you must dominate a niche.  Beyond the strategic requirement for dominating a niche there are 4 critical operational reasons to dominate a niche:

1.  If your Revenue Strategy is not compelling enough to even attempt to dominate a niche, you’d better rethink your strategy.  Your ability to dominate or at least to challenge domination is a quality control point for your Revenue Strategy.

2. 99% of all the companies on the planet have more possible customers (suspects) than resources to call on them all (even with the internet).  So everyone needs to marshal their resources in a very focused way to get the biggest return possible for invested resources. That focused way is a niche.

3.  If a company in a hot market decides to let random opportunity drive their revenue direction, the following are some of the risks from that random effort:

Fulfilling anyone with a need, with a general offer that is not truly compelling will fail in a more competitive market.

Fulfilling anyone with a need in a hot market results in a cost and pricing structure that has never been really tested, which results in high costs, low margins and a price not based on value or proven to be competitive.

Fulfilling anyone with a need does nothing to create long-term customer relationship.

When a market is hot it appears to be satisfied with random fulfillment.  When the market cools or is serviced by a focused/lean competitor who delivers high value the random fulfillment seller is at great risk or disappears.

Last if you are in any market that you are not dominating or working towards domination the customer sees you like every other random vendor. When that happens, the buyer’s decisions are driven by price.  At this point, the seller who has decided to dominate niche through high value or lean operations will win over the random fulfillment company every time.

4. When you dominate a niche based on adding real value, you:

                 a.  Make more money

                 b.  Have higher margins

                 c.  Win more deals

                d.  Win more deals with less selling cost and time

                e.  Will have more repeat business and referrals

               f.  Attract the right customers, staff and partners

 

Let’s be clear about what we mean by niche and dominance from the Revenue Science point of view.

A niche is a market that has the problem you uniquely solve and that can be compelled to buy your offer so both parties receive high value.

From your standpoint, a niche may seem very large.  So to dominate, you have to define your target niche so you have the Revenue Resources Required to execute domination. Working this into your next business plan will keep your resources focused and not wasted.

For years, Apple dominated about 5% of the computer market, but their customers were loyal, repeat buyers. They paid a high price. They did not just refer additional business to Apple, but were fanatic evangelists of Apple products – Apple truly dominated that niche, but not the computer industry.

Every company should target the niche to dominate that they selected in their Revenue Strategy and supported by the necessary Revenue Resources Required to execute domination.  Picking a niche to dominate that is beyond the available resources is to be out of integrity and will harm your brand.

Deciding to dominate a niche or a few niches (based on available Revenue Resources Required) will make everything more aligned.  It will be clearer and simpler for your team to execute.  The market will recognize who you really are by what you do. You will avoid a high “Cost of Chaos” so you will make a lot more money.

Don’t pretend you can do everything and randomly fulfill a general market.  No one will believe that. Even if your market is hot, dominate niches. It is more profitable for both the short-term and the long-term. Dominating a niche will give you a strong foundation to build on for your business planning.

Take a step back, get clear and start dominating at least one niche now.

About Guest Post Author, Rick McPartlin

Rick McPartlin-LinkedIn-Photo

Rick McPartlin-LinkedIn-Photo

Rick McPartlin, TEC Canada 2008 US Speaker of the Year, has spent more than 20 years applying “Revenue Generation” science in organizations as small as startups and as large as $50 billion corporate giants like Johnson & Johnson, ATT, Siemens, SAIC, E&Y, and Sun Microsystems.

Rick is the co-founder and CEO of The Revenue Game a rapidly growing firm focused on midsized companies that want to apply this science to proactively and predictably engineering the growth of profitable revenue in the real world.

Guest Post Opportunities

If you would like to contribute content for the high-growth tech industry, contact info@thestartupgarage.com

 

Watch Out For Snake Oil! How to Hire the Right Business Plan Writer

Watch Out for Snake Oil from The Startup Garage

Watch Out For Snake Oil! How to Hire the Right Business Plan Writer

Snake oil refers to any product with questionable or unverifiable quality or benefit. By extension, a snake oil salesman is someone who knowingly sells fraudulent goods or who is himself or herself a fraud, quack, charlatan, and the like [via Wikipedia]

Indulge me. Query “Hire a Business Plan Writer” into your favorite search engine. As a first-time entrepreneur, do the ads for most business plan services sound like this:

Business Plan Snake Oil Ad 1

 

 

 

 

As a seasoned entrepreneur, inundated with service provider and consultant guarantees of success, perhaps these ads sound more like this:

Business Plan Snake Oil Ad 2

 

Ok, alright…So, I took some liberties with those examples (and the character limits for an AdWords ad).

Whether you are about to begin your first business or starting another, understand the purpose of a business plan and establish criteria to hire a business plan writer.

The Purpose of the Business Plan

The first thing to know about hiring the right business plan writer and consultant is to understand the purpose of the business plan itself.  The business plan is not a single-use document or a hurdle that you overcome and never look back.  The business plan is not a glossy, collated presentation solely designed to attract investment.  The business plan is a tool that helps you through the business planning process.  It is a living document that needs to be updated regularly for as long as you are still in business.  The business plan will help reveal the major milestones that you need to accomplish.  It will provide your strategy for achieving these milestones and will act like a roadmap.  It will also include the key outcomes when these milestones are achieved including sales projections, expenses and cash flow.

Criteria to Hire a Business Plan Writer

Now that we understand the purpose of the business plan, we can begin discussing how to hire the right business plan writer and consultant.

  1. It is important that your business plan writer understands your goals and the resources that you have available to you.  If the professional does not attempt to take a holistic approach by enrolling in the professional and personal side of the equation then he/she is likely not the right individual.
  2. It is important that your business plan writer has the experience and expertise to take you through the business planning process.  Hiring someone, or a machine, to simply write a document for you will not end in a good result.  Hiring someone that has been through the startup process, that understands what works and what doesn’t, and has raised capital in the past will be vital to the success of your business and business plan.
  3. Be wary of consultants that claim to bring on investors.  While the business plan is an important tool in the capital raising process, investors are ultimately making their investment decision based on the team, the product, the market opportunity, the competition, etc. thereby making it difficult for any third-party to make such a claim.
  4. Do your due diligence to steer clear from the quacks, frauds, and charlatans. Ask to see sample work and testimonials.  Ask the consultant how many companies they have worked with and how much capital they have helped raise.  If you still are not fully convinced, ask to speak with past clients.

How The Startup Garage Can Help

Whether you have a question about writing a business plan or you would like to discuss our business plan writing services and previous client work, do not hesitate to contact us for a free consultation.

Wait…I lied!

The only snake oil I recommend is sold by Steve Earle and can be purchased on iTunes

 

 

The Premiere Showcase of San Diego Startups

Tech Coast Angels Quick Pitch Competition

The Premiere Showcase of San Diego Startups

Leave a reply

Thursday September 26th, Tech Coast Angels hosted their 7th Annual Quick Pitch Competition at Qualcomm headquarters. The lobby bustled with impressive ideas, hungry entrepreneurs and a sprinkling of angels looking for opportunities.

Linda Wells, Executive Director said, “The primary objective for the Quick Pitch is to foster the entrepreneurial spirit and promote investment opportunities.”

And it did.

Tech Coast Angels Quick Pitch Competition Qualcomm Lobby
Over 200 eager startups applied for the journey months out from the competition. Mentors were assigned, and the new businesses underwent the transformation to viable investment. Ten finalists presented to the crowd of over 500 leaders in the entrepreneurial community and to the diverse panel of judges.

Each had two minutes to sell their idea. The ten presentations ranged from medical devices to interactive social sharing platforms. Scores were given for content as well as presentation style.

Tech Coast Angels Quick Pitch Competition Ovapal

The Startup Garage at the 2013 Tech Coast Angels Quick Pitch Competiton

The big winner of the evening, Ovopal — the first wearable technology to track fertility and transmit readings to your mobile app. Co-founder Giovanna Scheidler embodied the excitement with a big smile and not only took the judges, but the crowd as well, winning the audience award by a mile.

In matching orange shirts and a rocking’ presentation, Rock My World, Inc. won for style — a sensor-based fitness wearable to align your music with your pace and keep you moving!

The content award was given to Abreos Biosciences, an easy-to-use testing tool to ensure the integrity of pharmaceuticals.

And last — drumroll please… The Startup Garage gave a surprise award for the company with the greatest potential, “Beyond the Garage” was awarded to Sqeak16. The mobile sharing platform allows you to speak to, doodle on and zoom in and out of pictures to create video in a conversational format. We look forward to working with them!

The Startup Garage Awards Winner at Tech Coast Angels Quick Pitch Competion in San Diego

Tyler with Dustin Bradley of FlipManager at Quick Pitch
Overall the evening was a huge success. We even met up with Dustin Bradley, a client and founder of FlipManager.com.

Tech Coast Angels is the largest network of angel investors in the US and is the number one source of startup funding in Southern California. We’re already looking forward to next year’s event. Visit the Tech Coast Angels website for more information.

Ten Deadly Sins of Writing a Business Plan to Raise Capital

Deadly Sins of Business Plan Writing from The Startup Garage

Ten Deadly Sins of Writing a Business Plan to Raise Capital

In order to launch a successful business and raise the capital needed to do so, a startup needs to consider several aspects of the business including the management team, the size of the opportunity, the product/service/technology, the market/sales/distribution channels, the competitive environment and several other factors.  Another key factor is how these business concepts are portrayed in the startup’s business plan.  Below is a list of the 10 most common mistakes, or sins, that we have encountered with entrepreneurs and past clients when trying to raise capital.

1. Focusing on Technology

The technology behind your startup’s product and service (especially for tech-based startups) is certainly important to investors.  They need to understand the technology and why/how it is better than that of your competitors.  Speaking towards your competitive advantages, it will take more than a patent to attract seasoned investors.  They want to see competitive sustainable advantages — aspects about the company that are not easily copied/implemented by your competition.  Once you have succinctly presented the technology and convincingly demonstrated your sustainable competitive advantages, move on to other sections of the business plan.  Many first-time entrepreneurs or entrepreneurs with strong tech backgrounds waste too much business plan real estate on the technology section and only manage confusing the reader as a result.

2. Missing the Mark on Assessing the Opportunity

If your target market is so broad that a 1% adoption rate will make for a successful business, then your target market definition is likely way too broad.  Investors want to see that you have a narrowly defined market with sales and market strategies tailored to target this specific market.  You can have a large addressable market that you hope buys your product, but it is important to demonstrate that you understand the importance of launching a business with clear and actionable target market.

3. Ignoring the Competition

All good business plans put considerable attention on the competition for several reasons.  1) Understanding the competition can help you understand your position/niche in the market and how to tailor your product, target market, pricing, marketing, etc.  2) Demonstrating the strengths and weaknesses of your competition allows you to contextualize your positioning in the market while demonstrating your competitive advantages.  3) A detailed competitive analysis shows investors that you are a thorough entrepreneur when it comes to business planning and that you are confident enough in your product that you aren’t afraid to discuss your competition.

4. Ignoring Market Need/Traction

Demonstrating market need and/or market traction will vary depending on the stage of your startup.  If you are pre-revenue then it will be difficult to portray market traction unless you have the budget to conduct customer surveys.  However, you can still demonstrate market need by highlighting comparable products or services.  You should also demonstrate the problem in the market that your product solves.  For startups with past sales it is important to demonstrate current sales and sales growth since launching.

5. Practicing Top-Down Sales Forecasting

Top-down sales looks at the overall market and uses this information to identify your company’s  projected sales, typically as a percentage of the market.  It is important to know the market size and the percentage of the market that you are projecting to capture in order to validate your model.  However, your model should not be based on a percentage of the market and will raise red flags for sophisticated investors.  Investors want to see a growth/revenue model that uses sales data and assumptions that predict sales by product and region.  They also want to see a ‘growth driver’ upon which your sales are generated.  This may be the number of sales representatives, website traffic and conversion rates, size of email lists, number of licensees, etc.

6. Unrealistic Exit Strategy and Multiple

“We expect to be acquired by Microsoft for a 50X EBITDA multiple” is not a good exit strategy.  Rather, provide some statistics of recent exits from comparable firms and provide data such as sale price, revenue at time of sale, revenue/EBITDA multiple.  Provide a range in the multiple size that you anticipate being able to attract based on these statistics and provide a description of key milestones that will demonstrate when you think the startup is likely to be acquired.

7. Unrealistic Valuation

First and foremost, investors may lose interest if your startup is offered at an unreasonable price as this poses an obstacle for negotiations before they even begin.  Additionally, if/when you need to raise the next round of capital, you dont want to risk taking in money in a down round because you overvalued the company early on.

8. Ignoring Milestones

Milestones are discussed in other sections of this blog but it is important to highlight them on their own as well.  Milestones, both past and projected, help to build value, establish credibility and project goals.  They show investors what you have accomplished to date (this also gives you legs to stand on when defending your valuation).  They show investors how you will spend their money.  They show investors that you are a sophisticated entrepreneur and that you understand what it is going to take to build a successful business.

9. Junk and Fluff

If the sentence, picture or graph does not, in some way or another, tell investors why they should invest in your business then leave it out.  Investors are busy and you’ll be lucky if you can get them to read half of your business plan in their first read through.  Don’t ruin your chances by including unnecessary junk or fluff as chances are these will be the choice lines that the investor decides to read.

10. NDA Insistence

In short, investors don’t sign NDAs.  Asking them to do so will make you look like you don’t know what you’re doing.  Investors are more interested in finding good entrepreneurs, not good ideas.  Investors know that anyone can come up with a good idea but that very few have the ability to actually pull them off.  Good ideas come down their pipeline all the time and they will not be afraid to overlook yours because of an NDA.

Investors look at hundreds of deals a month.  You are competing for their time.  Don’t waste precious minutes of their attention or risk not getting their attention because of an NDA that provides little to no benefit.  That’s right, an NDA provides little to no benefit.  If your idea is so easily stolen that justh earing the concept is enough to allow anyone to replicate it, then the investor likely wont be interested in the first place.  In any case, your business plan does not need to include the secret sauce and you should be able to openly share the concept of the idea of anyone.  Lastly, the power of any legal agreement is tied to your ability to enforce it.  Unless you are prepared to sue investors if you feel they stole your idea, why waste having them sign an NDA?

 

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Building a High-Tech Startup Team

Building a Tech Startup Team from The Startup Garage

Building a High-Tech Startup Team

Aligning the Startup Team Strategy with the Capitalization Strategy

The single most important factor to raising capital for any tech startup is the management team.  This is true for early stage funding as well as venture capital funding.  A bonafide team is the assurance that the idea can be executed and that the business can scale when the time is right.  Furthermore, when faced with adversity only great teams can respond to competitors, markets, funding environments, staff departures, PR disasters and the like.

Importance of the startup team from The Startup Garage

When building the team, avoid these common myths and mistakes:

  • A team is not one person and investors rarely want to invest in one-man shows.  While some investors will be willing to help you build your team, they will not be willing to invest in your startup if you are not willing to distribute responsibility and bring on diversified expertise.
  • Never confuse the number of years worked with experience.  Credibility is based on accomplishments and relevant experience.  Furthermore, a startup works differently than a large corporation.  Try to build a team with startup experience as these individuals will be far more likely to understand the importance of flexibility, perseverance, collective success and team playing.
  • Have a diversified team.  One recipe for failure (business failure and capital raising failure) is building a lopsided team weighted to one function of the business.  Don’t hire people with skills and qualifications similar to yours.  If you have a technical background and you are focused on product development, consider a co-founder with a sales and marketing background that can focus on selling your world class product.
  • Hire based on functionality and avoid having too many C’s.  Rather, give titles such as VP of Engineering, Product/Technology, Sales, Marketing, Finance, etc.  This helps to better divide the work, make people accountable, and show investors just why each founder/hire is key to the organization.
  • Don’t make everyone a founder.  Be sure to leave plenty of equity for investors.  You will likely need to raise more rounds of capital than you originally anticipated.  Having too many co-founders will only lead to your eventual dilution.
  • Hiring the right people at the right time is key.  You shouldn’t hire a senior executive from an established company for an early stage startup.  On the flip side, when it comes time to scale the company, the founder and CEO may need to relinquish their CEO title and hire a CEO with the ability to drive efficiency, make incremental process improvements and expand on the established market presence.  Below are some tips for aligning the startup team with the capitalization strategy.

Early Stage

With little to no revenue, many early stage entrepreneurs turn to the Co-Founder model to build credibility for their startup when raising seed capital.  This is not a bad strategy when done correctly.  The reality is that over time most founders will have their differences.  While you should be prepared to give up a large portion of the company’s equity to a co-founder, it is important that one founder maintains a majority share and creative control.

Additionally, be sure your co-founder is well diversified from your skill sets and traits.  Investors understand that you wont have all the pieces to the puzzle at this early stage.  But, the more business functions that you can divide among the original team the better.

Seed to Series A

For most tech startups, the Series A round allows the team to expand by making some key hires.  Typically, these hires fall into 2 buckets: product development and sales.  The CEO of the company will be in charge of leading the company by making these key hires, product managing, driving sales and understanding the companies financial situation.  This leaves the CTO / Senior Architect to focus on product development and managing the recently hired engineers.  On that note, it is important for high-tech companies to keep tech development inhouse.

Series A to Series B

Series B capital signifies that the company is ready to scale.  Key hires at this stage should reflect this strategy.  First, hire an office manager that can double as an admin assistant thereby allowing founders to not get bogged down in minutiae and focus on growing the business.  Hire a VP of Finance that can increase profitability by monitoring operations, legal fees, HR expenses, office space and the like.  Hire a diversified base of sales reps.  While consultative reps are key to building new business with big accounts, relationship managers are key to retaining those accounts.

 

Whether you have a question about your management team or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!