Summary: The Startup Strategic Journey

Two weeks ago, I introduced the Startup Strategic Journey, an eight step path that most entrepreneurs follow as they go from initial concept to a market-ready business ready to scale.

I then followed with eight individual articles following one startup, VisuALS Technology Solutions, LLC, as it moved along that path. Each article told a little more of the VisuALS story, taught generically about that step in the Startup Strategic Journey, and then shared how VisuALS specifically pursued that step.

With this article, I pull it all back together again as a single path, with a brief summary of each step and links back to the individual steps.

While this is represented as a linear path, it is very rare for a startup journey to be linear. Entrepreneurs are experts at the Build-Measure-Learn loop, iteratively improving every aspect of the business and occasionally pivoting to an entirely different business (requiring a revisit to every strategy already “done”). So, think of this journey not as a straight urban sidewalk, but as a beautiful, looping, regenerating pathway through the jungle that does eventually get from point A to point B, but with many experiments and adventures along the way.

Let’s look at each of the eight steps individually.

The Startup Strategy Skeleton

There are three critical elements that make up the Startup Strategy Skeleton:

• Problem: What problem are you trying to solve? Who has this problem?
• Solution: What is the new solution that you are bringing to solve the problem?
• Money: Where does the money come from? For a business, how will it make money? For a non-profit, what are the sources of funding?

Although it is essential to identify these three elements of the startup strategy, new ventures often change at least one of these elements before successfully launching.

The Value Proposition

In Value Proposition Design¹, a value proposition is defined as describing, “the benefits customers can expect from your products and services.” The authors of that book provided a very helpful tool, the Value Proposition Canvas, for developing and capturing a value proposition.

Developing a valid value proposition is not an afternoon brainstorming exercise on a whiteboard in a conference room. Steve Blank’s mantra of “get out of the building” is critical. You need to spend time deeply understanding the customer, and you need to test many different potential value propositions to learn which will actually solve the problem and create value for the customer.

The Minimal Viable Product

It’s natural to want to wait until a product has enough features and finish to be something you’d be proud of before giving it to customers, but that is a dangerous temptation. Reid Hoffman, co-founder of LinkedIn famously said, “If you’re not embarrassed by the first version of your product, you’ve launched too late.” The real goal of the Minimal Viable Product (MVP) is to spend as little time and as little money as possible to get something into the hands of a few customers that demonstrates the very core of your value proposition.

To be clear, the objective of an MVP is NOT to convince customers that you have the right final solution for them, but rather to learn from customers how to iterate from what you have to what they really need — or to learn that you need to go back to the drawing board and identify a different solution.

The Business Strategy

The business strategy will reflect a competitive market and an envisioned future role within that market. As with other strategies, the Purpose Pyramid can help in developing and communicating a business strategy. The pyramid has four main sections:

• The Panorama: The external (opportunities and threats) and internal (strengths and weaknesses) realities within which the strategy is being developed.
• The Purpose: A single, brief statement that captures the essence of what your organization is all about — what you aspire to and what you want to be known for.
• The Pillars: The three critical realities that are necessary for your organization’s purpose to be achieved.
• The Plans: Three very specific tangible actions you are taking to establish and strengthen each pillar (for a total of nine plans).

The Business Model

Alexander Osterwalder defines a business model as, “a representation of how an organization makes (or intends to make) money.” My favorite tool for representing a business model is Osterwalder’s Business Model Canvas, first introduced in his book Business Model Generation².

The Business Model Canvas simplifies everything about a business down to nine components on a single sheet of paper. In typical Lean fashion, the contents of those nine boxes start as hypotheses that you iteratively test and refine.

The top portion of the Canvas represents business decisions. The bottom portion reflects the financial impacts of those decisions. The right half, or front end, of the business model represents the decisions made in order to bring the value proposition to market. The left half, or back end, of the business model represents all the decisions that enable the business to successfully deliver that value proposition to the target customers. Successful execution of the front end results in the revenue streams. Successful execution of the back end requires investment represented as cost structure.

The Business Plan

A business plan document creates a narrative that anyone can pick up and understand. A good business plan should address two critical audiences: potential investors and the venture team themselves.

For investors, the business plan document should address all of the critical factors necessary for the success of the venture. These readers of the plan will read the plan to answer three types of questions about each aspect of the business:

1. Does the management team have a plan?
2. Does the investor believe successful execution of the plan would generate the hoped for results?
3. Does the investor believe this management team can successfully execute the plan?

For the management team, the business plan helps keep everyone on the same page. A new venture typically has lots of activity and not enough people. That means that team members are moving at full speed in many directions, often with little time to stop and coordinate. A good business plan clearly communicates what needs to happen for the success of the venture so that everyone can be working in concert.

The Funding Strategy

There are many forms of funding and the right funding strategy may change throughout the life of a venture. Evan Baehr and Evan Loomis in their book Get Backed³ simplify funding options down to four broad categories:

• Create funding through profits (also called “bootstrapping”)
• Borrow money through debt (taking out loans)
• Buy funding through selling equity (finding investors)
• Get people to donate money (charitable giving or crowdfunding)

They then dive into five different kinds of equity investors, each with different pluses and minuses:

• Friends and family (relatively easy to land, painful to disappoint)
• Crowdfunding (platforms that enable many small investors to participate)
• Accelerators (not big direct funding sources, but great places to learn/mature and position for funding)
• Angel investors (early capital, often with experienced advice attached)
• Venture capital firms (increasingly large funding rounds with high expectations and very active investor involvement)

The Market Entry Strategy

By the time a startup gets past the Business Plan and the Funding Strategy, many hypotheses have been tested and refined and decisions made. The final details really come down to product and market. When is the product ready to launch and what is the roadmap for future development? What market segment will you initially target and how and when will you expand to additional markets? What channels will you use to reach that initial market? What is your pricing strategy? How will you position in the market?

As every entrepreneur knows, Market Entry is not the end of the story, but just the beginning. It does, however, represent a significant milestone at the end of a very long, and typically “interesting” journey!

Sources:

¹Osterwalder, Alexander, Yves Pigneur, Gregory Bernarda, and Alan Smith. Value Proposition Design. Hoboken, NJ: Wiley, 2014.

²Osterwalder, A., & Pigneur, Y. (2013). Business Model Generation: A handbook for visionaries, game changers, and challengers. New York: Wiley & Sons.

³Loomis, E., & Baehr, E. (2015). Get Backed. Harvard Business Review.