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Milestones for funding new ventures : Traction Points

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Traction is an elusive term thrown around by every Venture Capital firm when discussing interesting ventures to invest in. As an entrepreneur looking for funds, finding investors is really about understanding which investors you should be talking to and what you need to have to show them. Using lean startup principles build out your idea with more efficiency, less waste and better results. Understand what investors want to invest in, and prioritize your efforts.

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Milestones for funding new ventures : Traction Points

  2. 2. 2 Four Traction points 1. Idea/Technology Development 2. Product/Market Validation 3. Business Model/ Early Growth 4. Rapid Growth https://www.forentrepreneurs.com/saastr-2018/
  3. 3. 3 The Startup Journey http://disciplinedentrepreneurship.com/ * Bill Aulet’s Book: Disciplined Entrepre integrated, comprehensive and proven for developing the product to launch a While each new startup is unique in m process for starting them can be accel this rigorous framework that also allow individuality and variability in the outc What it is really like
  4. 4. • A Startup is a temporary organization designed to search for a repeatable and scalable business model https://steveblank.com/2010/01/25/whats-a-startup-first-principles/
  5. 5. Investment Readiness Level Mkt Size/Competitive analysis Complete first-pass canvas Problem/Solution Validation Low Fidelity MVP Experiments Validate Product/Market fit Validate right side of canvas Prototype High-Fidelity MVP Validate left-side of canvas Validate metrics that matter Friends and Family Angel investors Venture Capital None
  6. 6. $1B+ Market? Scalable Solution? Recurring Revenue? Past Successes? Full team? (Hipster, Hacker, Hustle Traction? Investment Interest Level
  8. 8. • How do I get funding at this stage? •  Do it yourself (and learn.) 1. DEVELOPING YOUR IDEA SWEAT EQUITY
  9. 9. https://strategyzer.com/canvas/business-m 1. DEVELOPING YOUR IDEA
  10. 10. •  Nothing beats a good conversation. 1. DEVELOPING YOUR IDEA GET OUT OF THE BUILDING TALK TO POTENTIAL CUSTOMERS Look For Pupil Dilatio
  11. 11. • Lean Startup Principle: • Examples: Lean Startup Challenges, Startup Weekends, Launchrock, Mock ups, WIX, Code Training, Hackathons, etc. 1. Developing your idea USE FREE/CHEAP RESOURCES AND TEST
  12. 12. • Goal: 1. Developing your idea VALIDATE ASSUMPTIONS -FIND POTENTIAL CUSTOMERS https://www.udacity.com/course/how-to-build-a-startup--ep245
  13. 13. 1. Developing your IDEA What does traction look like? Examples: •  100 – 1000 possible users/emails, •  10-15 potential customers, •  2-3 letters of intent, •  1 enterprise client MOU/LOI COMMITMENTS
  14. 14. • How do I fund my prototype? • Get creative. Leverage your network. Reach out to friends, family, SBIR/ STTR, customers, Kickstarter, Indiegogo, and similar sources. • Tell your story. Make a little go a long way. 2. CREATING YOUR PRODUCT ASK THOSE YOU KNOW
  15. 15. • Essentials Actions: 2. Creating your product BUILD A TEAM Include a hipster, a hacker and a hustler; In other words, every good team needs a designer, a developer and a business person. https://www.forbes.com/sites/andyellwood/2012/08/22/the-dream-team-hipster-hacker-and-hustler/#5f7d6b182c85
  16. 16. • Lean Startup Principle: •  Build an MVP of MVP (Minimum Viable Product of Most Valuable Piece) •  Use API’s and other existing resources when possible 2. Creating your product VALIDATED LEARNING More: https://www.slideshare.net/KellySchwedland/lean-startup-basics-evidence-based-entrepreneurship
  17. 17. • GOAL: •  Paying customers •  Product usage 2. Creating your product VALIDATE PRODUCT “REAL CUSTOMERS”
  18. 18. • What does traction look like? • Examples: • 10,000 downloads, • 1000 daily active users, • 100+ paying customers, • 1 paying enterprise client with 100+ seats ($3K - $5K/month), etc. 2. Creating your product PROOF OF VALUE TO CUSTOMERS
  19. 19. • How do I fund this thing? ANGELS Prepare your 10 point pitch and share your traction with angel investors, networks, funds, Angel.co, etc. https://www.slideshare.net/KellySchwedland/a-guide-to-indepth-investor-pitches-by-elevate-ventur 3. PERFECTING YOUR BUSINESS MODEL
  20. 20. You Need to Get Here! Product/Market Fit: LTV/3 >= CAC You Are Here You’ve only just begun *Ideally CAC< A 3. Perfecting your business model
  21. 21. • Essentials Actions: • Acquisition Activation Retention Referral Revenue. 3. Perfecting your business model CONVERSION METRICS Stage Conversion Status Conv. % Est. Value (*not* cost) Acquisition Visitors -> Site/Widget/Landing Page (2+ pages, 10+ sec, 1+ clicks = don’t abandon) 60% $.05 Activation “Happy” 1st Visit; Usage/Signup (clicks/time/pages, email/profile reg, feature usage) 15% $.25 Retention Users Come Back; Multiple Visits (1-3x visits/mo; email/feed open rate / CTR) 5% $1 Referral Users Refer Others (cust sat >=8; viral K factor > 1; ) 1% $5 Revenue Users Pay / Generate $$$ (first txn, break-even, target profitability) 2% $50
  22. 22. • Lean Startup Principle: •  Measure progress and prioritize work. •  Innovation Accounting is a way of evaluating progress when all the metrics typically used in an established company (revenue, customers, ROI, market share) are effectively zero. 3. Perfecting your business model INNOVATION ACCOUNTING https://www.ideou.com/blogs/inspiration/innovation-accounting-what-it-is-and-how-to-get-started
  23. 23. • GOAL: •  This equals successful monetization 3. Perfecting your business model EPEATABLE / SCALABLE BUSINESS MODE https://www.slideshare.net/KellySchwedland/building-the-billion-dollar-saas-unicorn-for-2018
  24. 24. •  What does traction look like? • *cost of acquisition is less than 1/3rd lifetime value; $1 in, $3+ out •  Enterprise: 1000 seats @ $10/seat/mo., •  Big Enterprise: 2 pilot contracts and some $ •  Social: 100,000 downloads/signups •  Marketplace: $50,000 revenue/mo. •  E-Commerce: $50,000 revenue/mo. 3. Perfecting your business model CAC < LTV/3
  25. 25. • How do I fund this thing? 4. Growth CASHFLOW? OR VENTURE CAPITAL? Meet with a dozen venture capital firms to find fit and funding for growth.
  26. 26. • Essentials actions: • Execution to metrics, revenue, profits, team growth, key frustration process improvement and acquire niche companies. 4. Growth CONSISTENT GROWTH
  27. 27. • Lean Startup principle: •  Build, Measure and Learn •  Product Features •  Distribution Channels •  Verticals 4. Growth BML
  28. 28. • GOAL: • What does the door look like: • Buyout or IPO? 4. Growth INVESTOR EXIT
  29. 29. • What does traction look like? • Consistently driving customer acquisition and revenue as expected. • Finding new avenues for revenue growth. 4. Growth ONGOING ROLLOUT https://www.linkedin.com/pulse/saas-adventure-triple-double-1b-neeraj-agrawal/
  30. 30. • Next steps: • Meet with investment bankers • M&A specialists • Private Equity groups 4. Growth PREPARE TO PITCH
  31. 31. 31 Have questions? See something I missed? Let me know. Kelly Schwedland 219-405-5723 Kellys@elevateventures.com Find More: https://www.slideshare.net/KellySchwedland/ ElevateVentures.com