Builders’ Stage Gate Model secrets
Startup Studios are experiencing a true growth cycle, and studios are popping up all over the world, now totalling a staggering 800 and counting. One can only guess about the true reason for the rising popularity. It could be the real results the first wave of studios are seeing, the pressing need to invest as early as possible, or the lack of support that plain capital investments have. No matter the reason, studios must differentiate offers to entrepreneurs for many years before studios start looking the same from within. Until then, studios should differentiate their operating model according to their strengths. Let me explain…
We’ve expressed many times that we believe studios go through two big cycles in their first 5 years of existence. The first cycle is all about figuring out how to build and finance startups in parallel, and most of the time, after the 4th startup, they move into the next cycle, having perfected their models and attracting bigger funding. Builders is at the end of the first cycle, and one of our best-kept ‘secrets’ is our relentless review of performance related to our stage-gate model.
Before we delve into the ‘what’, let’s briefly discuss the ‘why’. When validating one of our earlier companies, we gave ourselves quite a bit more time to validate the business case we believed could change the game. Without doubting the outcome, we secured a dozen letters of intent, incorporated the startup, and invested all the capital at once. It doesn’t take a genius to figure out what happened here… we burned through the capital quicker than expected, and the commitments didn’t materialise into paying customers. Sure, there’s a lot more to this story, but that’s beside the point. We incorporated a company with too few data points that it could work and lost time, resources, and momentum. From that point on, we committed ourselves to reviewing our model every cycle.
So, what does one do to prevent incorporating a company that doesn’t need a pivot the day it’s launched? We’ve noticed that studios in the US would keep their startups within their studio and only spin them out when attracting investors, customers, or key team members. For us, incorporation happens almost a year before spin-out, so our answer is different. We added an extra gate and a 10-week phase before incorporation we call “Shape”.
Within this intense 10-week period, the goal is to build and validate a mini-company, an MVC, if you will. Entrepreneurs who have partnered with us and have put in around 10 weeks of near-solo efforts, with some support from a studio core team, will now go into a 10-week stint with the entire core team at their disposal to shape the mini-company and find their own voice. And yes, it’s intense; it’s a whole other ball game, moving from validation research mode into full-blown management and execution.
Shaping the minimal viable company
What does one need to do before incorporating a company? Ultimately, a validated business case, a unique go-to-market hack for an addressable market, a compelling founder/market story, a prototype or even MVP, a mini-brand including name, early landing page, launching customers, a seed-style pitch deck, first budget, and last but definitely not least, partner with a technical co-founder. Let’s dig into a few of my favourite ones:
Deep customer conversations
Never stops, still having customer conversations during this phase. For us, it’s not about running paid experiments with landing pages, but all about spending time and diving deep with customers. I’m not joking when I’m talking about our 100-interview mark. In the 20 weeks running up to incorporation, we’re talking to customers non-stop, averaging 5–15 conversations each week. The conversations in the Shape phase lead to optimising pricing and packaging insights, which support closing launching customers to prove first real traction.
Crafting the story
The Shape phase is the perfect time for brand-building. Crafting a compelling visual identity and narrative based on the founder’s market story. With that creating landing pages and developing foundational stories that articulate the value of the product. Producing tangible, visual assets that communicate the brand value and foster a sense of pride and accomplishment. These stories become so crystal clear and inspiring that even their mom could proudly share them at her weekly bridge club!
Partnering with a technical co-founder
Knowing who the ideal customer is, together with a strong visual identity and compelling founding story, is nearly what we need to attract and pitch to technical co-founders. As a final push, we draft the customer product journey and Shape the first product to understand the initial roadmap. We’ve tried to partner with CTOs before all that, but the results were just different. Finding a buddy to build the product with is not just a skillset it’s a vision, experience and vibe match like no other. To simplify; when we’re able to have a clear elevator pitch for the CTO the chances of completing our 3 headed co-founder team are much higher.
Pitch worthy of investment
Talking about a great pitch. We tend to round to Shape phase with a smooth seed-style pitch deck, complete in the mini-brand. The reasoning behind this is that it's hard to compile the startup in a few to-the-point slides, and it displays the founder’s ability to convey a compelling story combined with a unique go-to-market. Why? We’ve learned to treat the incorporation of a company as presenting all of our findings to an investment committee. We went as far as creating a scorecard for ourselves and including one of our studio investors to score together with us.
Hold on, why again?
Why go through all of this effort before incorporation again? There are a few upsides here. We determine if the startup can obtain early traction and find out If the founder can convince customers, stakeholders, and a co-founder to become part of the journey. And for the studio core team, it’s a crucial period to ramp up venture-building efforts and create a deeper relationship with the problem, solution, market, and founding team. Most issues will be ironed out in this phase, and a bunch of big smiles should emerge at the end of the Shape phase.
Lights out, and away we go
With a well-defined plan, a validated value proposition, and a compelling pitch, the startup is ready to move through the gates and transition into the “Create” phase. The fully shaped and validated startup is ready to make its grand entry into the market, bringing the vision to fruition. And we should not have to pivot the second we launch 😉.
Build.. eh Shape with us
Check out our Build with us page here.
