Tag Archives: Startup

Understanding Barriers to Entry

Barriers to Entry from The Startup Garage

Understanding Barriers to Entry

Entry into any market by a startup business is in some way possible, though it is often constrained by some sort of economic, procedural, regulatory or technical obstacle.  Such obstacles are often referred to as ‘barriers to entry.’  Some examples of barriers to entry include high startup costs, strict laws and regulations, inability to access resources, economies of scale, high tariffs, high switching costs, zoning, distributor/supplier/vendor agreements and customer loyalty.

Creating Barriers to Entry

Industry leading competitors often put a lot of focus on establishing barriers to entry to keep new entrants out of the market.  The more a competitor can achieve customer loyalty, benefit from economics of scale and limit new entrants access to resources, for example, the more difficult it will be for a new entrant to compete.  The most effective way to establish barriers to entry is through developing sustainable competitive advantages that are difficult for competitors to replicate.  Some sustainable competitive advantages that many companies turn to include

  • Intellectual property – patents, trademarks, domain names, copyrights and trade secrets that provide competitive protection)
  • Dynamic product lines that allow companies to establish multiple revenue streams and follow-on product variations
  • Cost advantages – economies of scale, vendor relations, or some other factor that allows you to offer a significantly lower cost than your competitors
  • Brand loyalty – keeping your customers happy can be the most effective way of keeping them from turning to your competitors.

When you are in the business planning process and writing your business plan, be sure to think about sustainable competitive advantages and barriers to entry that you can establish to make it difficult for new entrants to cut into your successes.

 

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

Investment in Mobile App Development Industry is Soaring

Mobile App Development Trends from The Startup Garage

Investment in Mobile App Development Industry is Soaring

VC Funding in Mobile App Development Still Hot

Since 2012, mobile app development companies have taken $262M in VC funding across 36 deals, which accounts for 59% of the $446M to the mobile app development space overall.  Some of the largest acquisitions included Kony Solutions at $18.3M in a Series D round from Telestra Ventures as well as Mobiquity at $12M in a Series B round from NewSpring Capital and Sigma Partners.  On a broader note, VC funding to the developer tools category as a whole reached $646, a 77% increase from the previous year.

M&As Are Also Hot

Investors bullish outlook on the market has been spurred by the increasing number of enterprises utilizing mobile apps as well as numerous M&As in the space.  Some of the large M&As include Facebook’s acquisition of Parse for $85M and IBM’s acquisition of Worlight for $70M (highlighted in the chart below).
VC Mobile App Development from CB Insights

Graph and data thanks to CB Insights.

With growth projections for the mobile industry as a whole in the double digits, mobile app development companies will likely continue to see an increase in VC funding in the years to come.


 

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

Sustainable Competitive Advantages

Sustainable Competitive Advantage from The Startup Garage

Sustainable Competitive Advantages

A competitive advantage is some aspect of the company and/or its product or service that gives it an edge over its competitors and allows it to generate greater values for the firm (in sales and/or profit margins) for the firm and its shareholders.  Two primary examples of competitive advantages include: 1) comparative cost advantage – a firms ability to sell a good or service at a lower cost than its competitors as a result of lower production costs; and 2) differential advantage – a firm’s ability to product products or services that are seen as better than its competitors’.

Sustainable Competitive Advantages

Simply put, the more sustainable the competitive advantage, the more difficult it is for competitors to adopt the advantage.  Sustainable competitive advantages are not easily copied and generally stem from one or more of the following: vendor relations, product sourcing advantages, prime location, unique products/services; customer loyalty, customer service reputation, or distribution channel advantages.  When developing a business plan and business model, it is important to look beyond the product/service/competitive advantages and try to establish advantages that are truly sustainable.  The following are some tips to help you with this process:

  • Intellectual Property

While all I.P. has its shortcomings, patents are probably the best sustainable competitive advantage on offer as they provide 20 years of competitive protection.  Beyond patents, it is important to consider trademarks, copyrights,  domain names, long-term contracts and trade secrets.

  • Dynamic Product Line

A one-of-a-kind, differentiated product line may have several competitive advantages.  But for how long?  Don’t be the one-hit-wonder of the entrepreneurial world by coming out with one great song but failing to back it up with a great album and future albums.  Discover how your innovative technology can incorporate with add-on products that bolster your revenue sources as well as follow-on products that keep you ahead of the competition.

  • Dramatic Cost Advantage

In order for a cost advantage to be a sustainable competitive advantage you will need some dramatic breakthrough in the technology, manufacturing or revenue model of the product.  A breakthrough that is not easily copied by your competitors and that is ideally protected via patents or tightly held trade secrets.

  • Seasoned Management Team with Key Relationships

One of the greatest competitive advantages is a great management team.  A great management team with proven success in the past is most likely to continue their track record, lending to a real sustainable competitive advantage.  One of the main reasons for their past and continued success will come from the key relationships they have developed over the years with vendors, manufacturers, suppliers, distribution channels, industry influencers, major contractors, etc.

  • Brand Loyalty

By building strong relationships with your customers and keeping them happy, you will benefit from repeat businesses even if you do not offer the cheapest or most effective product.

 

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

Energetic VCs on the Rise

Energetic Venture Capital from The Startup Garage

Energetic VCs on the Rise

Active Venture Capitalists

The number of VC firms completing four or more deals per year has increased annually since 2009.  There is a lot of chit-chat about capital crunch and how venture firms in particular are in the decline.  However, this cannot be further from the truth.  First, there is an increase in the number of VC firms.  Second, these firms are investing at their highest since 2009.

As shown in the graph below, we’ve seen a steady increase in the number of active VC firms from 2009 to 2012, with 2012 registering more than 450 active firms.  2013 is trending well with nearly 500 VCs who have already done 2 deals this year.

The number of VC firms completing four or more deals per year has increased annually since 2009. TSG Enterprise. The Startup Garage.

Graph thanks to CB Insights.


 

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

Legal Tech VC Funding Beginning to Stagger

Legal Tech vs Funding Stagger from The Startup Garage

Legal Tech VC Funding Beginning to Stagger

Although the legal industry is massive ($300B), it is seeing a drop in funding by 16% year-over-year as investments are concentrated at the seed stage and exit activity is lukewarm. Funding to legal tech startups barely topped $100M across 30+ deals, with the largest deal representing 45% of total investments.

 

Deal Flow

Oddly enough, the industry actually experienced a 41% increase in deal activity despite the 16% decrease in actual funding as depicted in the graph below:

 

Although the legal industry is massive, it is seeing a drop in funding as investments are concentrated at the seed stage and exit activity is lukewarm.  The Startup Garage. TSG Enterprise.

Graph thanks to CB Insights.


 

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

6 Classes of Mobile Startups That VCs Find Interesting

6 Classes of Mobile Startups That VCs Find Interesting from The Startup Garage

6 Classes of Mobile Startups That VCs Find Interesting

As most consumers nowadays would agree, one of the most useful consumer devices is the smartphone.  VCs happen to concur.  With that said, they find some spaces in the mobile tech sector to be more exciting than others.  Below is a list of the 6 top sectors that get VCs excited:

1. B2B Business Solutions Mobile Applications

More and more, businesses are turning to mobile applications to streamline their business and/or adopt an entirely new business model that is dependent on these technologies.  Some usch mobile applications include Flurry (mobile analytics), AdMob (mobile advertising) and Urban Airship (mobile push messaging).  What makes these solution providers so attractive is their straight forward business models and large market opportunities.

2. Location Enabled Applications

Businesses such as Uber (ordering a ride when you need it) and HotelTonight (finding a place to stay overnight) also employ a straightforward business model, they take a percentage of every transaction.  Noticing a trend?

3. Mobile Automation

Another space that VCs are investing in are mobile applications that control non-mobile products such as Nest (mobile control of building thermostats) and eSecure (mobile control of building alarm systems).  These applications make other services much more useful and provide on-the-go access.  They also provide opportunity for large acquisitions by major industry players.

4. Mobile Payments

Mobile payment applications such as iPhone’s square also employ a simple business model, they take a transaction fee.  They also provide businesses with loyalty programs and couponing services.  The beauty in the business model here is that they have a strong value proposition for all parties involved.

5. Mobile Games

Though mobile games are a dime-a-dozen and it is very much a hit driven business, the leaders of these simple games (Angry Birds, Minecraft, etc) generate hundreds of millions of dollars in sales.

6. Photo Applications

The success of companies like Instagram, Snapchat and Vine is no secret.  In a similar boat are mobile messaging applications such as WhatsApp and Voxer.  While these companies do not have early proven business models, those that make it big can implement one down the road.

Keep in mind, the key to VC investment in mobile and the internet in general is to invest in what hasn’t already been introduced.  Rather, VC investors are looking for the next best thing.  Nonetheless, what we can learn from the categories above is that they like simple business models that can scale, quickly.


 

Whether you have a question about 6 Classes of Mobile Startups, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

10 Tips to NOT Fail a Pitch Presentation

10 Tips to NOT Fail a Pitch Presentation from The Startup Garage

10 Tips to NOT Fail a Pitch Presentation

The reason why most people dislike giving presentations (such as your startup pitch), is because they aren’t any good at it!  Thankfully, there are some tips that you can implement fairly quickly to step up your game.

1. Personality

You need to show some energy during your presentation.  Your audience will make a very quick judgment call as to whether they want to listen to this presentation or merely be present while they check their emails on their iPhones.  Your pitch is not a conversation at a cocktail party; use your hands, project your voice, have some movement, add variety to your tone and appear to be excited about your product or service by acting animated.

2. Structure a Story

You should structure your pitch in the form of a story with a beginning, middle and end.  The beginning brings your product to life and excited the audience for the rest of the story to come.  Think, opening action seen of a James Bond movie.  The middle provides the plot and supporting evidence: what is the problem, who are the bad guys and how does the hero solve the problem.  The ending builds on the beginning and middle of the story with a climactic action scene that brings closure to the story and leaves the audience feeling utterly satisfied.

3. Be Memorable

Your investors will likely have seen tens if not hundreds of pitches in their career.  Your goal is not end up as another forgotten entrepreneur whose business plan made it to the trash.  However, keep in mind, your main goal is to show your audience that you are able to make this business a success.  As a result, humor, self-deprecation and unprofessionalism is not the name of the game.  It can be subtle, such as a powerful image in your deck or unique structure to your presentation.

4. Know Your Audience

The more you know about your audience, the more you can use it to your advantage.  If the majority have kids, have advanced degrees or enjoy sports, you can incorporate these pieces of knowledge into your presentation to establish common ground and likability.   You will also want to think hard about your audience’s pain points.  What is that they need you to answer in order to achieve your desired outcome?  What is it that they don’t want to hear that will send them running for the hills?

5. Keep It Simple

Don’t confuse your audience by providing them with every last detail of your product or service.  Give your audience the essentials what you want to convey and why it matters.  Use as few words as possible to still get your message across.  It is OK to use facts and figures in your presentation, but only if these numbers help you to tell your story in a compelling way.

6. Keep Your Pitch Deck Visual

You want your audience’s attention on you.  They are investing in you and not your pitch deck.  The more time they are spent trying to read a spall sentence on your slide, the less time they are focusing on you.  You can provide two version of your presentation: one with a lot of detail that can be left behind as a takeaway or emailed, and one with mostly images and key takeaways that support the message you are delivering at that point in time.

7. Practice, Practice, Practice

It is all too apparent when someone has not prepared.  You should know your presentation in and out.  Furthermore, you should be prepared to answer questions that are not provided in your presentation.  In fact, it is a good rule of thumb to have backup slides ready to help you answer questions that you anticipate the audience asking.  Not only will this help you to answer the question, but it will show your commitment and that you came prepared.

8. Stick to the Time Frame

If you have been giving a time frame for your presentation, stick to it.  You can even plan on going under and leaving time for questions.  Your presentation will always go longer than you anticipated, and if you end early, your audience won’t mind a bit.

9. Demo and Remote Control

If you have a demo, have someone else deliver the demo.  The last thing you need is the confusion of operating your demo while trying to remember your talking points.  Additionally, plan on investing in a remote control to change from slide to slide if you do not already own one.

10. Summarize

Before moving on from each slide or each major point that you are trying to make, be sure to summarize the key takeaway.  This not only helps to provide a clear transition and signals the audience that you are moving on, but it helps drive the point across.

If you are not already doing so, start working these 10 tips into your pitch strategy to step up your game.

 

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

Tips for a Successful Relationship with a Contract Developer

Tips for a Successful Relationship with a Contract Developer

Finding the right contract developer can be a big undertaking, especially if this is your first time doing.  This blog will provide you with some critical advice on how to develop an effective and efficient relationship with a contract developer.

1. Define the goals of your project

Before you approach any contract developers, you will need to understand and have clearly defined your project goals.  Usually, you will fall in one of two boats: you either want to develop a prototype or beta that will allow you go out and start testing your product, or you will want to make the end product perfect, just as you envisioned it.  If you fall in the former category, you will likely be able to higher the cheaper developers.  Though, keep in mind, you will need to do a lot of hand-holding and provide a lot of feedback.  If you fall in the latter category, you will need to shell out the money for a professional developer that can create great code and provide advice for overcoming any ambiguities.

2. You are paying your developer to code, not to consult

It is important to go into the relationship knowing that your developer is not your strategic adviser   The more clearly you can convey the desired features that you are going for and your vision for the end product, the better the outcome will be.  If you can provide mock-ups of how you envision the end product, even better.  The more you know what you are looking for and the better you can communicate this to you developer, the better chance you’ll have of getting exactly that.

3. Negotiations and Milestones

For the most part, you have the upper hand when negotiating with your contract developers.  If you are not sourcing your work to several developers, you should be.  Not only does this allow you to compare pricing, services and capabilities, but this gives you leverage in your negotiations as well.  Two great ways to leverage this power to protect yourself are through milestones and payment terms.  Setting up milestones will allow you to see progress and determine if you want to continue with the developer before you have gone too far down the process.  Similarly, setting up the payment terms to have as much payment as possible towards the end of the project, after you have been able to review some of these milestones, will further protect your pocketbook.

4. Elance and Lower-Than-Market-Value Developers

In today’s globalized society, you can find great developers abroad via freelance websites such as Elance for a fraction of the cost of a domestic developer with the same skill sets.  Be sure to review their portfolio, ensure that you can clearly communicate with the individual and they are able to answer your questions in an intelligent and timely manner.  If they have reviews posted, be sure to read those as well.  One great way to interview the developer (and to work with them down the road if you contract them) is to communicate via Skype.

5. Project Management

You may have thought that hiring and paying your contractor was enough to ensure that your project is appropriately managed.  However, this is not always the case.   While it is in their interest to do their best work for their clients and to keep them happy, be sure to touch base frequently to ensure that progress is being accomplished.

6. Feedback

It is very rare for a contract developer to get it right the first time around.  This should be expected.  Rather than letting your emotions get the better of you, take some time to clearly describe to your developer what you don’t like about the product and what would make it better.  Again, clearly defining the scope of what you are looking for will help.

7. Payment

Like most service providers, the better you pay, the better the service you will receive.  If you like what you have received be sure to pay your developer for their hard work.  Additionally, pay on time.  This will make them much more likely to continue to do their best work for you down the road.
 

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

What Is Your Core Competency?

What Is Your Core Competency? From The Startup Garage

What Is Your Core Competency?

Too many entrepreneurs and startups get caught up trying to be everything for everyone. You can always add features or sub-products down the road, but don’t lost sight of your mission and your core competencies.  Focus on one problem that your target customers have and solve it.

Get Focused

Once you start throwing in every decent idea that can be added to your product and service offering, you will find yourself with a disjointed solution that only partially solves your customers problems.  As a startup, you need to determine your core competencies and stick to what’s truly essential.

Exercise: Trimming the Fat

No matter how refined you think your product or service is, cut it in half.  Pare down the features until you are left with the most essential ones, and then do it again.  By doing this process, you’ll avoid over-engineering, you’ll be much more efficient, you’ll spend far less on product development and employee costs and you’ll wind up with a much more narrowed target market to focus your limited sales and marketing budget on.  Furthermore, you’ll end up with a product/service that truly solves your customer’s core problem.
 

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

Angel Investor Portfolio Insight

Angel Investor Portfolio Insight from The Startup Garage

Angel Investor Portfolio Insight

Angel investors typically invest in seed or early stage startups that are seeking between $150,000 to $1M.  Often, a group of six to twenty angels will pool their funds to make such an investment.  The average check written by angels is ~$30,000.  They are typically accredited investors that are investing with the intention of engaging with the management team in some capacity (advising, coaching, consulting and possibly even becoming a member of the board).

Angel’s seek startups with a premoney evaluation of $0.5M to $3M and typically seek 20%-40% ownership.  Angel’s are looking for returns of 10X+ in less than 5 years.  Angels are typically uninterested in anything less than a 10X potential return as the investment will not balance the deals that go south in their portfolios.  Along the same lines, Angels look for exits of $30M-$50M.  Angels typically undergo extensive due diligence prior to closing a deal.


 

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