based in Chicago, George Deeb is the Managing Partner Red Rocket Ventures , a growth consulting, advisory and executive staffing firm based in Chicago.
I recently had the pleasure of serving with a group of investors with Joe Dwyer, associated with Equity Fund and founder of my good colleagues . He made a very interesting comment - "try to kill your startup," he advised startups in the dining
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my first reaction was that it was a rather strange advice to a room full of aspiring entrepreneurs who are trying to successfully get their businesses off the ground. But, as Joe said, he said "if you have done everything you could do to kill your startup, and failed to do so, then you are really something that is defensible and the value of buildings. "
it presented very interesting pearls of wisdom.
So what are trying to kill your startup actually mean?
You have to push and probe in all areas of the company, looking for holes that could lead to potential gaps in business or may facilitate potential moves by competitors that will prevent your own efforts.
All macro-level issues? too small industry? Space without interest for VC?
If the industry is not big enough, it will not appeal to investors. If the industry is not a venture capitalists like to invest in (eg, related technology), it will not appeal to investors.
All competition issues? Prices out of line? Not as good as the others?
Investors want to save first movers or "top movers" in areas where there is no ton of other start-up venture capital already ahead of them.
All management issues? The weaknesses of the current team? The team is economically motivated to come in the long term?
Investors like to support experienced teams who have worked together for a while with incentives to increase significantly before them (so they stick around).
All revenue issues? Is there a real business model here? Revenues can easily evolve?
Very few companies can go out without revenue model out the door. So you need to show investors how you plan a credible way to generate income with assumptions focused on realistic market.
Is this your cost too high relative to sales? Does the value of your customer for life provide economic and convincing repeat sales? Is it a long sales cycle or short term?
Investors are always looking for an affordable cost of customer acquisition that can lead a return on short-term investment, and has already been tested to ensure the plan is realistic .
All technology issues? Is it easy replicated by others? Is it patentable?
The larger your entry barriers, the better it will attract capital.
All human resources related? Is it difficult to find talent in this space? Can you afford the talent you need?
Investors prefer models with limited human head, and evolving technologies.
Do you have enough money to build not only the product, but to test the economics of initial marketing? Is it a requirement of small capital, or a major fundraising exercise?
Make sure you have the economy of the pressing unit including a high gross margin. The less money you need to obtain proof of concept, and margins, the better.
issues Any investment? Is there a logical buyer for this company? Is a 10x return be easily reached?
If you can not logically explain to investors how they can leave their investment in hardware back to them, they will not be interested.
At the end of the day, it reiterates many points we talked about in my Final list for Startup Success . So get out your guns and daggers and begin to pull away at your startup, as your competitors will be doing.
If you survive this dog fight, the hard work of your company can really start building