A CEVG Perspective: Key Factors to Generate Growth

One of the key challenges any start-up faces is, once it has a product, how to generate growth. Given the breadth and depth of entrepreneurial experience within the members of CEVG, we asked ourselves “What are the key factors that entrepreneurs should consider when scaling their business?” Here are some of our thoughts.

  • Job 1 for any new company is to be diligent, realistic, andbrutally honest about “what we do better than anyone else in the world”… and then build your company around this. To be special, the company has to drive a wide gap in a clearly identified market. Often, a company’s ability to do this can be clouded by to “maintain optionality” and “have several shots on goal.” This is usually done so that one can quantify the “Total Addressable Market” in the billions (inexperienced investors often have a role in this!). This may feel good, but it is a losing path. On a practical level, an inability to focus on “what you do best/what matters most” leads to a waste of time/capital. Having said this, the ability to really identify “what you do best” is harder than it sounds (you don’t have all of the information/you don’t want to get too narrow too early, etc.)…. But you have to do it.
  • Don’t let the perfect be the enemy of the good. Get a product out there, get reference customers and get revenues.  Capital is far easier to raise if you have sales.  (NB: The flip side to this coin is don’t do too many trials, particularly at discounted terms.  This can undermine your long-term price positioning and can create a difficult path to better pricing.)
  • A key element to ramping early sales is developing deployment plans in parallel to technology plans. The conventional wisdom may be to develop the technology first, then the deployment. But our experience is that substantive deployment plans (finding supply chain partnerships, finding the right strategic relationships,having more than one partner/channel to choose from, figuring out the “right” arrangement/value sharing) take far longer than expected. If done sequentially, the pressure on time to market and capital until revenue can be painful….
  • Be realistic when estimating the time and investment needed to establish and ramp sales. The products and services of early-stage startups often represent a risky purchase decision for large enterprises, so they can be (understandably) slow to adopt. Far too many start-ups fail to understand and plan for this. The best approach we have seen is to use paid pilot trials, but these are still slow. Related is the idea of “Catching a slow rabbit and killing it.” Most companies are built on many small successes (singles and doubles); not on one home run out of the box – that rarely happens. Focusing on developing many small wins creates the building blocks of a great company – and helps keep employees motivated and excited about the future.
  • Listen, listen, listen. The best market research is real world feedback. Some companies find that the iterations between a starting technology and customer feedback doubled the rate of innovation; this can dramatically ultimately lengthen your lead relative to competitors. It is important to get started and it is important to have a culture that both values listening to the marketplace and plodding through what may seem like a never-ending series of iterations. CEOs should plan in their first few years to talk to at least 100 customers (or potential customers) every year. That’s only two per week and will provide invaluable information for your company’s progress.

Remember, above all, that product revenues are the cheapest source of capital you will ever have. Early sales create market interest, provide essential feedback to product development and, not unimportantly, excite investors.

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