First and Last Mover Advantage In startup markets, there are advantages to being the first mover and advantages to being the last mover. Here are some advantages of being a first mover: The first mover in a market can gain market share due to the lack of competitors. The first…

AARRR AARRR stands for Acquisition, Activation, Retention, Referral, and Revenue It’s the mental model for the customer lifecycle. In growing sales this model breaks down the process into stages and steps which the startup can metric as follows: Acquisition —  find users through multiple channels Activation —  excite customers with…

Inversion Mental Model The inversion mental model generates new startup ideas by inverting the problem. By looking at the problem in reverse you can ideate new product solutions and business models. This technique tests the assumptions and gives us a new way of thinking. For example, instead of asking “how…

Earned Secret The earned secret mental model postulates that you should have some information that most others don’t before launching a startup. The earned secret gives you an edge over other startups through a key insight into the customer or industry. Those outside an industry have little or no insight…

Minimum Viable Product Mental Model The minimum viable product called MVP tests the market before building the final product. The MVP is designed to gain customer feedback and show market validation to the investor. It tests the riskiest assumptions with small experimental products. The MVP is not an early version…

Product Market Fit Mental Model Product market fit is a mental model that demonstrates your product meets the market’s requirements.   It’s a key milestone in the journey of the startup as it’s the point of inflection for growth and later scale. Without product market fit the startup will most likely…

The Idea Maze The idea maze is a mental model for how a founder sorts through the plethora of ideas to find the right one on which to build a startup. There are many choices including the problem to solve, product to build, and how to monetize. In navigating the…

The Babe Ruth Effect The Babe Ruth effect mental model comes from Babe Ruth who once said: “I swing big, with everything I’ve got. I hit big or I miss big.” The mental model postulates that it’s better to take big risks than to avoid failure. Eventually, the big risks…

Regret Minimization The regret minimization mental model helps you make difficult decisions by projecting yourself into the future and looking back on the decision to be made. Jeff Bezos once said,  “I knew that when I was 80 I was not going to regret having tried this.” Today you are…

Disruptive Innovation The disruptive innovation mental model describes a simple innovation starting at the bottom of a market and then moves up the curve to overcome the industry incumbents. This mental model was first defined by Clayton Christensen in his book The Innovator’s Dilemma. Industries with expensive products are overtaken…

The Why Now “The why now” mental model builds the case that now is the right time to launch and raise funding for a startup. Timing is key to a successful startup launch. Launch too soon and the market won’t be there. Launch too late and the competition will be…

Introduction to Mental Models A mental model according to Wikipedia is “an explanation of someone’s thought process about how something works in the real world”.   It is a representation of the surrounding world, the relationships between its various parts, and a person’s intuitive perception about their own acts and their…

Product Roadmaps The product roadmap is a shared resource that outlines the vision, priorities, and direction of a product over time. It aligns the goals of the company to deliver the product and sets the expectations of the customer. The first product is the minimum viable product and sets the…

Pre-seed Product Work The minimum viable product is one of the more challenging products to design. There are many choices and limited resources available. In designing your MVP consider the following: Scope into your core technology in building out the first version. Eliminate as much of the surrounding building as…

Product Reporting It’s important to track the key metrics for your product. Here’s a list of numbers to capture: Customer acquisition cost — the cost to acquire a customer. Customer lifetime value — the total revenue received from each customer on average. Churn rate — the percentage of customers dropping…

Product Usage Metrics Metrics are a key tool in product management. In managing a product track these metrics: Customer acquisition — track the performance of the product in acquiring new customers. This is often done broadly across all products but should be done by each product as well. Customer adoption…

Product Development Process There are many approaches to product development. Here are some approaches companies use: Defines the ideal process. This lets the process work out from project to project.  Systematizes development activities. The core systems are made available to the team to use as they like. Focus on the…

Gamification of the Product In designing your product consider adding gamification to it. Here are some key elements to consider: Include goals for the user to accomplish with the product. This makes it engaging for the customer. It also provides a benchmark on how much the customer uses the product….

User Experience Design The user experience of the product must be designed into the product from the beginning. Here are some key points in researching the user experience: Understand the user’s goal and what they are trying to achieve. The user may be trying to generate a report or store…

Product Data Product data is the information about the product used for product management purposes. Here are some key data points to capture and maintain: Customer tests for new product features. Capture A/B test data into a central repository as the answers may be useful for building future features. Key…

Product Development Priorities There are many features to add to a product and never enough resources to do all of them. Consider these points in prioritizing your product development: Look for lost sales to find high-priority features to work on. Focus product development on customer requests. Look at how the…

MVP Mistakes In developing a minimal viable product avoid these mistakes: Trying to create your vision fully in the MVP. The MVP will be a greatly reduced version of the envisioned product. Taking customer feedback literally. Customers will provide feedback and ask for specific features.   In building a product you…

Product Features The features of your product will determine your competitive position in the market.  For any market, there is a baseline set of features that customers will expect. To enter the market your product must provide these basic services. To beat the competition your product must have differentiation features….

Product Adoption Product adoption raises awareness about the product and drives users to sign up for it. A strong product adoption process generates more customers, reduces churn, and increases customer loyalty. Product adoption comes in stages as follows: Awareness — first make your customer aware of your product. It is…

Product Experience Product experience is the customer’s engagement with the product. Consider these customer touch points in developing the product experience: Sign up — this is the stage customers commit to the product and join. Make sure you have an easy signup process that states clearly what the customer will…

Product Research Before building your minimum viable product, you’ll need to research the space. Here are some key points to consider: Know your customer and their problem very well. Many founders start building a solution to a problem that they only know superficially. Talk to at least fifty prospective customers…

Product Research Best Practices In researching your product include these best practices: Always be researching when talking with prospects and customers. Focus on the audience and their needs and not the product and its features. Identify the customer journey and how your product fits into it. Track the user’s thought…

Product Innovation Innovation is a part of product research and development. Product innovation provides a competitive advantage, opens new markets, and increases sales to existing customers. Determine how much you will spend on product innovation. Set a budget for people and time to work on those innovations. Base this budget…

Product Development Challenges Product development in a startup brings several challenges. Here’s a list of key challenges to overcome: Picking the right problem to solve. There are many problems to solve so it’s important to select the right problem up front.   You’ll need a compelling solution and a means to…

Minimum Viable Product Product development begins with a minimum viable product. In building your MVP, set constraints with respect to development time and selling time.  In software development, it takes six months to build the product and six months to sell it.  If you can’t build it in six months…

Source of Failures in Product Development There are many challenges in product development. Here’s a list of failures points to watch out for: Inexperienced developers who mean well and work hard but lack the experience. Hire for the skills you need rather than try and build the skills on the…

Challenges in Product Development Product development brings many challenges to the startup. Here are some key points to watch out for: Funding takes time to raise so focus your product development on MVPs and draw as many lessons to be learned as you can from each one. Building a product…

Outsourcing Product Development Many startups outsource their product development. Here are some key points to consider before outsourcing: Outsourcing gives you access to additional skills and resources you may not be able to hire yourself. It can also lower your costs as you pay for the work to be done…

How to Reduce Costs in Product Development Product development often runs over budget. Here are some steps to reduce costs: Start with good planning and define the goals clearly. Many projects launch with unreasonable expectations. Track the progress using metrics to know how you are doing.  Make sure the team…

Tips for Success in Product Development It takes a plan and persistence to bring a product to market.  Here are some tips to make your product development successful. You’ll need to bring passion to the project to see it all the way through. Use Minimum Viable Products to test out…

Product Development Using IDEO Startups can use the IDEO  method to build out their product development process. Here are the steps: Observation — observe the user and their pain points. Ideation/brainstorming — turn the observations into product ideas and use brainstorming to generate multiple variations. Prototyping — mock up an…

Product Development Team Dynamics Product development requires a team approach. Here’s a list of key points to consider: Assess the skills of each team member to understand the group’s capabilities. Set goals for the team before the project sprint begins. Lack of clarity causes confusion among the team members. Check…

Product Development Best Practices Product development is an important function in a startup. Here are some best practices to consider: Maintain focus on the user. Involve other stakeholders in the process such as sales and marketing. Metric your product development process to know how you are doing. Focus on those…

Lean Startup Approach to Product Development The lean startup approach seeks to discover a product and business model that works. Unlike big companies which have a large staff to maintain an existing product line, the startup has little to no staff and works on finding new business opportunities. Startups use…

Product Development Plan Here’s a checklist for launching product development for your startup: Research the industry for trends and competitors in the space. Talk with prospective customers about their pain points. Consider not only the product to be built but the revenue to be generated. Build out several Minimum Viable…

Creativity Is a Process Ideation requires creativity.  Creativity is a process no different than any other activity. Here are some steps to follow in generating creativity in your ideation program: Start with preparation. Capture your ideas into a list for evaluation. Incubate the ideas. Spend time exploring the ideas listed….

Testing Your Ideas After generating ideas for your startup, you’ll need to test those ideas. Consider these points in your evaluation: Research the market on the product you intend to build and sell. Is it big enough and growing fast enough for a venture deal? Who is the competition and…

Basics of Product Development Product development should follow a standard process. It starts with a strategy. That strategy should align with the goals of the company and mesh with its current product roadmap.  The specific product should further the company’s business objectives such as increasing revenue, reducing costs, or holding…

Where to Start Your Product Development It’s important to have a product development process for your startup. Here’s a list of what startups should do to get started: Focus on the customer’s pain.  Find that which is critically important and not just nice to have.  Do it better than the…

Product Development Using Stage-Gate Startups can use the Stage-Gate method to build out their product development process. Here are the steps: Idea generation — use brainstorming, market research, and other tools to come up with ideas. Idea screening — create a set of criteria to judge the ideas and determine…

Finding Your Value Proposition In ideating for a startup you must first start with a customer problem.  Once you find a solution for that problem, you then identify your value proposition. A value proposition is how you solve a problem and the benefit it brings to your customer. Here are…

The Vision Problem In turning your startup idea into a product you’ll need to avoid the vision problem. The vision problem is having a product or service in mind and then trying to build and launch it as your initial product. Big vision products take years to develop in most…

Legal Aspects of Ideation There are financial and legal aspects to startup ideation. Here are some key points to consider: Test your idea with a minimum viable product before investing substantial resources. All ideas look good until you have to actually build and sell it. As always there should be…

Use Design Process for Ideation In ideation for a startup, it’s important to follow a process. Consider these process steps for your ideation program: Empathize — understand your customers’ problems very well including what works for them and what does not.   This takes the research to a deeper level and…

More Mental Models for Ideation There are several more approaches to ideation for a startup. Consider these mental models for your ideation process: Move online — take offline interactions and move on to the web. Roll-ups — acquire other companies into your company or into a new one. Provide enabling…

Ideation Steps Ideation requires a process. There are specific steps required to reach a successful outcome. Here are the steps to follow for your ideation program: Define the problem. Write out a problem statement to define clearly the problem to be solved. Set the criteria. This defines what criteria the…

Lateral Thinking Lateral thinking is solving problems using an indirect and creative approach via reasoning that is not immediately obvious according to Wikipedia. In your startup ideation process consider using lateral thinking. Here are some steps to implement it: Come up with a random word and apply it to the…

Lead Users in Ideation Lead users are the early pioneers looking to solve a problem. They face problems that need to be solved in advance of the general market providing a solution. Lead users start well ahead of the mainstream market so they create their own solutions. They can be…

Brainstorming in Ideation Brainstorming can be an effective tool in the ideation phase of a startup. It works best when focused on the right elements. The startup exists to solve a customer problem. Here are some steps to consider for your brainstorming in the ideation phase: Start with a list…

Key Mental Models for Ideation There are several approaches to ideation for a startup. Consider these mental models for your ideation: Solving a customer problem — focus on reducing the cost or increasing the convenience of the solution. Transfer a solution — this takes a solution from one industry and…

Startups Are Not Big Companies Big companies are those who have found product-market fit and have encapsulated their repeatable and scalable business model into processes. Big companies who want to achieve innovation will find that they are not startups. Startup ideation creates new ideas that disrupt those existing processes. New…

What Is Ideation for Startups? Ideation is a thought process that takes conceptual ideas into implementation.   Founders launching a new startup go through the ideation process to generate the concept for the business. Ideation comes from the current knowledge of the problem to be solved molded by principles and convictions. …

How to Use Ideation in a Startup Ideation is a key stage in the startup process of developing a product or service. Founders use it to question the obvious and come up with a new solution. To pursue ideation in your startup, consider the following: Generate many ideas whether they…

Criteria for a Good Idea In ideating for a new product, there will be many ideas. Up front consider all ideas and then qualify each one. To judge the ideas consider the following: Put yourself in the place of a customer and ask if you would buy that product. Good…

Disrupt or Create In ideating a new startup you can either disrupt an existing market or create a new one.   In disrupting an existing market consider the following: Move the transaction and delivery of the product online. Online capabilities generate network effects. One can create data sets and include fintech…

Signs of a Bad Startup Idea In reviewing startup ideas for your business here is a list of signs pointing to bad ideas: You know absolutely nothing about the market, product, or community. While great startups come out of new domains, it’s helpful to have some experience with the space….

Screening Startup Ideas In reviewing startup ideas here is a list to screen them: Are you excited about the idea or just okay with it? You should have some sense of excitement about it. Does anyone else think it’s a good idea? It helps to have some validation from others,…

Testing Your Ideas at Low Cost It’s important to validate your startup ideas. Here’s a list of low-cost methods to do so: Search the web for competitive solutions. Look at how they are positioned in the market relative to your idea. Do any of those solutions have recurring revenue? Research…

The Acid Test of Startup Ideation It’s easy to generate startup ideas. It takes work to research and validate them. Once you qualify an idea apply the acid test to it. The acid test is can you set up a repeatable process for generating revenue with it. Create a low-cost,…

Identify Your Startup Idea Advantages In validating your startup idea look for these advantages: Does your idea resonate with the potential buyer? Your buyers should be excited about it when you tell them. Is your idea perceived to be better than the competition? Buyers should see the advantages right off…

Start With the Problem Good startup ideas don’t come by looking for startup ideas. They come when you find yourself saying “that’s interesting” as you notice someone trying to solve a problem. To generate ideas for a startup, start with the problem to be solved. Choose a problem you have…

Where to Focus Your Startup Ideas In searching for startup ideas here are some key points to consider: Start with a current solution to the problem you want to solve. Don’t change everything but instead only change one or a few things. Focus on one or two innovations such as…

Questions to Test Your Startup Ideas After startup ideation comes to the testing phase. It’s important to test your startup idea with these questions: How many people need your solution? Is that enough people to make the business work? Consider how many customers you need at your chosen price point…

Tracking Your Startup Ideation Progress It’s important to track your progress in startup ideation. Metrics should be used from the very beginning to measure your progress. Here are some steps to take: Track the number of customers contacted and provided feedback. Measure the number of customers who try out the…

Signs of a Great Startup Idea In reviewing startup ideas for your business here is a list of signs pointing to good ones: 1. Growth — there’s a growing market around it. 2. Broad-based — a lot of people have the problem you are trying to solve. 3. Urgent —…

The False Pretenders Emerging technology markets bring several challenges to the investor. These markets are new and cutting edge but are also immature, unevenly distributed, and opaque. In the early days, it’s not clear what the real winner will look like. In many emerging markets, the false pretender precedes the…

Portfolio Tracking In running a VC fund, you’ll need to set up a system for portfolio management. You’ll need to provide quarterly and annual reports to the Limited Partners, so it’s important to set up a system for tracking the investments. Select a portfolio management tool that generates basic metrics…

How to Find Startup Ideas There are several ways to find startup ideas. Here are three methods to consider for your ideation efforts: Look to the future and ask yourself the following questions: How are people changing? What long-term problems do they have to deal with? How have values shifted…

Impact Investing Metrics Many VC funds have impact investing as a part of the investment thesis. Impact investing takes into account the social impact of the fund in addition to the financial return. For impact investing, include metrics showing the impact of each investment. There are several ways to measure…

How Startup Ideation Works Startup ideation is a key step to building a successful company. Here are the key steps to generate good startup ideas: Surround yourself with people who have a feel for the trends and what’s coming next. Look for disruptive innovations in technology. Follow platforms and applications…

Key Performance Metrics In running a fund, you’ll need to track key performance metrics. Metrics should cover performance at all levels, including individual investments, the overall fund, and how it compares to other VC funds.  Investors will want to see the numbers at all levels, including the following: Fund’s investment…

Cost of Running a Fund In running a VC fund, there will be costs to cover.  Here’s a list of key costs to include in your pro forma: 1. Salaries for the partners and other employees. 2. Benefits for the partners and employees. 3. Office rent and related expenses such…

Investment Returns on a VC Fund In a VC fund, limited partners look for greater returns. The risks are higher, and the hold times are much longer, so LPs look for better returns than the stock market. In general, they look for a 10-20% IRR better than the market index….

Compensation In setting up a VC fund, you’ll need to determine compensation for the partners and team members. Most funds use the 2% management fee with a 20% carry model. This means 2% of the funds raised will be used for salaries, along with 20% of any of the profits….

How Many Partners? In setting up a VC fund, it’s important to select the right number of general partners for the fund. Most funds have at least two partners to provide the necessary skills. Some funds have one founding partner and then several venture partners to help. Funds under $50M…

Fund Managing Skills In choosing a manager for a VC fund, look for the following skills: Ability to raise funding from Limited Partners. This means the manager has a network of potential investors and knows how to pitch. Access to quality deal flow and the ability to vet potential investments….

Conflicts of Interest In setting up a VC fund, beware of conflicts of interest. Funds associated with other groups such as universities, accelerators, or incubators may find a conflict with other funding activities in that group. These groups are often focused on helping the startup launch. This leads to funding…

Communicating With LPs In launching a VC fund, you’ll need to set up ongoing communication with the Limited Partners called LPs. It starts with setting expectations for the returns on the fund.   In many cases, it’s 20% to 30% per year, with most funds returning capital in years 7 to…

Sourcing Deal Flow for the Fund In running a VC fund, you’ll need to set up deal flow sources and run screening processes. First, set up three to five quality deal flow sources that provide a consistent flow of startups to review. Maintain those relationships and provide feedback to the…

Team Skills Required In setting up your VC fund, you’ll need to build a team that can make it successful. Here are the critical skills required: 1. Business expertise and knowledge of the industry. 2. Basic finance related to startup investing. 3. Sales and marketing as it relates to startups. …

Designing the Fund In setting up your VC Fund, you’ll need to consider the structure and philosophy behind it. Here are some key points to determine: 1. The fee structure and how it relates to the current market rates. 2. The size of the fund and the general partners’ investment…

Fund Reporting In setting up your VC Fund, you’ll need legal and accounting support. Look for providers who have done the work before and bring experience to the project. You don’t want to pay people to learn on the job. You’ll need legal support to set up the fund documents….

Accounting and Governance There are specific rules for the governance of a VC Fund. The limited partners must be accredited investors. There can be no more than 99 investors in the fund. There can be no “bad actors” in the fund.  Venture funds are different from companies in that they…

How to Track and Report Results In running an angel group, it’s important to capture and report the investment results to the members. Here are some key points to consider: 1. Capture the investments made into a portfolio management system, so everything is in one place. 2. Keep the system…

How to Manage the Diligence Teams In running an angel group, managing the diligence process is key to successfully funding deals.  Here are some points to consider in managing the diligence process: Write out the diligence process for others to use and include templates and key questions to answer. Setup…

VC Fund Core Documents In raising a fund, you’ll need to set up the legal documents that define how and when the limited partners provide the funds, what the fund manager will do with those funds, and how they will return the funds back to the limited partners.  Here are…

Startup Boards — Investing in Startups There’s an old angel saying, “Angels like to have a little fun, do a little good, and make a little money.” Investing is more than just about money. I’ve found my successful investments covered all three of the elements of the old angel saying….

Startup Boards — 3X in 3 Terms Sheets The biggest challenge in investing in startups is finding the exit.   Time value of money is important and should be part of your return metrics. Startup investors look for a 44% IRR.   IRR is Internal Rate of Return and represents the return…

Startup Boards — Foundation for Startup Investing Startup investing is a risky business. Not all the investments will work out.   Know your risk tolerance and how much risk you want to take.   Most investors allocate 3 to 10 percent of their investments into startup investing. Allocate a specific amount of…

Startup Boards — Becoming an Angel Investor For those who want to become an angel investor to fund startups, here are some key steps: Meet accredited investor requirements. You must meet the SEC criteria for accredited investors. You can see the specifics on the SEC website. In short, you must…

Where Does the Angel Play? So, what startups do angel investors pursue? Angel investors invest in high-growth startups, most often tech-enabled. Restaurants, retail, and service businesses are not necessarily a fit for angel investors. Angels seek a return on investment in the range of 44% IRR. While some angels are…

Startup Boards — Startup Investor Skills — Managing the Portfolio Startup investors need to hone their skills in order to succeed over the long run. Key skills include:  1. Evaluating teams. 2. Assessing products and markets. 3. Accessing financial capital not only for the current round of funding but for…

Startup Boards — Startup Investor Skills — Accessing Financial Capital Startup investors need to hone their skills in order to succeed over the long run. Key skills include: 1. Evaluating teams. 2. Assessing products and markets. 3. Accessing financial capital not only for the current round of funding but for…

Startup Investor Skills — Evaluating the Product & Markets Startup investors need to hone their skills in order to succeed over the long run. Key skills include:  1. Evaluating teams. 2. Assessing products and markets. 3. Accessing financial capital not only for the current round of funding but for later…

Startup Boards — Startup Investor Skills — Evaluating the Team Startup investors need to hone their skills in order to succeed over the long run. Key skills include:  1. Evaluating teams. 2. Assessing products and markets. 3. Accessing financial capital, not only for the current round of funding but for…