"Startup Essentials,"
July 07, 2000
by Vincent M. Occhipinti

Your odds might not be that far off. An established venture capital fund will receive more than 9,000 business plans per year. Of those, only .17 percent, or about 15 companies, will secure funding. Why did those 15 get financed? Because they had a strong combination of four components critical to a startup's success: great team, right market, focused execution and market leadership.

With the right resources, great employees can build great products and services.

Great team
The first startup essential is attracting stellar individuals into your organization: employees, board members, advisory members, and partners. Every person associated with your company is a credibility point that shows customers, prospective employees and VCs that this company is going to be a success.

While most entrepreneurs articulate the importance of "building a strong team," they tend to wait too long before they begin. Top-tier management will cultivate, grow and attract top-tier employees. With the right resources, great employees can build great products and services.

Here's the conundrum. How do you build a top-tier team until you get financing, and how do you get financing until you have a top-tier team? First, start with a commitment to bring in complementary skills, including a stellar CEO, as soon as possible. Having a hard time recruiting Jim Barksdale to be your next CEO? Then get him, or someone like him, on your board of advisors. Be creative, use all your contacts and fearlessly recruit a strong advisory board. A strong advisory board can open funding doors, provide strategic direction and help the company recruit quality employees.

Right market
What is the actual, addressable size of your target market? There must be a large, demand-driven market for your products and services, and a compelling value proposition.

To gain venture financing, a company typically has to have the potential to achieve a market capitalization of $1 billion or more.

Test your ideas on potential customers and survey them to develop your product specifications. Don't assume that what is intuitive to you will be wanted by them. Knowing your target market and competition will increase the likelihood of building, pricing, marketing, distributing and selling your product or service successfully.

Focused execution
There is a good chance you will get distracted. Keep your execution focused on the primary target market to yield the greatest results. Avoid the temptation to tackle too many opportunities and related markets too early. At the same time, if your business model and initial strategies are not resonating with customers, be willing to change, but stay focused on your new positioning.

Market leadership
Those who get there first usually get the most. If possible, quickly establish alpha and beta tests with customers. After they have been successful, lead your market and execute with speed. Use momentum to your advantage by continually improving your product and entrenching your value proposition in the minds of your customers. The speed at which you execute will produce barriers to entry and credibility that will help capture market share and venture-capital attention.

Most startups do not begin with these essentials, and each one drives the other. The best partner, venture capital or otherwise, should help you build the right balance among these essential components. While there are many other startup essentials, if you have these four, you are well on your way to building a sustainable company.

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