The Secrets to Early-Stage Startup Success

The Secrets to Early-Stage Startup Success

Get advice from the local voices who help drive startups

If you look up the success rates of startups, you might find some dismal results. In Ohio, however, the startup story is a positive one. With local organizations like Rev1 Ventures achieving $2 billion in economic impact, CincyTech using expertise and experience to form and build companies and JumpStart’s Core City program, it’s no surprise that Ohio’s startup community has a not-so-secret talent for helping out budding businesses and entrepreneurs. With that in mind, we asked these leaders for their tips on surviving a startup’s early years and going from founder newbie to natural.

Remsen Harris, Senior Partner, JumpStart Inc.

Q: I’m at the very beginning of my startup journey (I have an idea, or I’ve just made a business plan). What should my next immediate steps be?

A: Gather feedback from the market to validate your idea. This is easy to do through conversations with prospective customers. Ask open-ended questions about the problems they experience, the impact of these problems and the importance of solving these problems. Early on, your primary objective is to learn how the market views the problem you intend to solve. Through these conversations, ideas can be further fleshed out with input from representative buyers. Remember, it’s important to get input from many potential customers in order to really validate the idea. Experts recommend speaking with at least 100 prospective customers

Q: When is the best time to approach an investor for funding? How far along should an idea / startup be?

A: The best time to approach investors is before you need money. By approaching investors early, you can first determine their interest in your fundamental idea. Once you’ve determined there is an interest, then you can learn what they would want to see the company achieve before considering investment or writing a check. This early feedback can be very valuable to founders seeking funding, as it can guide their overall funding strategy.

It’s also important to remember that different investors fund companies at different stages. For example, bigger check writers typically invest at later stages. So, it’s important to align your investor outreach with those who invest at your company’s current stage. Most angel investors will want to see some form of product or prototype with early feedback from the market that provides some degree of validation for the idea.

Q: If you had to break down the startup process for early-stage companies into 5 actionable steps, what would they be?

A: 1. Create Value: Develop a great product/service that creates value for customers – then validate the concept through conversations with representative customers/consumers.

2. Start with an MVP: Launch with a lean product and evolve it with input from customers. As Reid Hoffman said, “If you’re not embarrassed by the first version of your product, you’ve launched too late.” This is great advice that emphasizes the importance of getting your product to market early in order to receive feedback on the product from customers.

3. Culture: Build a culture of success in which every employee is empowered to create value for the customer in whatever way is relevant given their role in the organization. Empower employees and invest in their success.

4. Execution: Understand what milestones create value for your company and focus on achieving these goals. Develop key performance indicators to measure progress and performance against milestones. Review performance metrics and refine strategies and tactics to optimize execution. If you’ve not achieving goals, ask “why” and refine your plans accordingly.

5. Prioritize: There are many things to do at a startup which typically operate in an environment of resource scarcity. Given this situation, it’s critical to be able to figure out what is the most important thing to do right now. Gather input from your team on top priorities and focus on those priorities first.

Mike Venerable, CincyTech, CEO

 Q: What resources would you consider to be indispensable for an early-stage startup?

A: An experienced start-up/venture attorney, and free time for the founder(s) to make and define the problem/solution with prospective customers.

Q: What’s the best piece of advice you’ve ever received in regard to starting a business?

A: You are the biggest investor in your company. Leaving the normal working world to start a company is not for most people. It’s lonely, risky, and often consumes years of your life with little financial reward. Money can be earned back, but lost time can’t. Be sure you want to make that investment.

Q: If you had to break down the startup process for early-stage companies into 5 actionable steps, what would they be?

A: 1. Ideas are plentiful, solutions are rare. Focus on finding a solution to a problem, often in a new market.

2. Talk to informed people about your solution — prospective customers, distributors, entrepreneurs and experts to see how you should externalize it.

3. Build a 90-day plan to get as much done on your solution as possible without any outside capital, and then execute it.

4. If you make good progress, try another 90-days, but if you are running into barriers that only money can solve, then start thinking about getting your first slug of capital and build a plan, based on research and context, that gives an investor a clear path to increased value for a reasonable amount of capital. (You will need outside input always.)

5. Execute on your first value-creating milestone like developing a business plan or pitching customers.

Doug Groh, Director, CincyTech

 Q: What is something founders who are just getting started might forget?

A: The solution and benefits to the customer are primary — your technology is secondary.  We have too many people come in enamored with their own tech and customer benefits are an afterthought instead of the lead.  Also, make sure you develop a deep knowledge of your target market and your customers. Even twenty-five years ago this meant spending four-hour blocks of time at the library. Today, there is substantially better information available immediately to anyone with the internet, but we often see companies deficient in this area. Now, you still have to do the hard work of organizing this information in light of your solutions, but the raw information is easily accessible, it just often goes unused.

Wayne Embree, Executive Vice President, Investments & Venture Acceleration, Rev1 Ventures

 Q: What resources would you consider to be indispensable for an early stage startup?

A: You’ll hear us say all the time, “get good advice.” Find people who know your industry who have been through the startup journey before to help you lay out the path. The other resource is having a co-founder. So, if you have the business skills, but may not have the technology piece, find a co-founder who brings the technology. And conversely, if you have the technical acumen, find somebody that has the business skills to join you in founding the company and launching it. Having that combination, two or three people, before you really begin seriously building the company will increase your odds of success.

Q: Should I attend a pitch event or competition? Why or why not?

A: Sure. I think the more opportunities you have to present the idea and practice doing it in a compelling way increases the likelihood that you’ll be comfortable on stage any time that you are asked to present the business, or the notorious elevator pitch, which actually happens more often than people realize. Getting comfortable with telling your story is really important. But read the fine print. Know what it is you’re being asked to do and who’s going to be in the audience. Are there any expectations? Are you being asked to pay? Understand those things upfront before you make an agreement to go into a pitch competition.

Q: If I have applied for funding a few times, but I haven’t secured any, what would my next steps be?

A: I think it’s really important to understand the feedback you’re getting from investors. A lot of investors don’t ever like to say “no.” So there are a lot of euphemisms for no. It’s necessary to understand what it is the investors are telling you about the business if they’re not willing to fund it. What are the things you need to do to improve the story, to improve the team? Are you not looking at your market the proper way? Do you not have customers that you can reference? So really keeping it focused on the attributes of the business are really critical.

Another important question you need to ask yourself is: are you talking to the right investors? You may not be talking to people who really understand your business. They may not have money. They may not invest in your geography. So really understanding the qualifications of the investors before you go out to raise money is important. But once you do start having those meetings, really, really listen to what they’re telling you. When you go to investor meetings, take somebody else with you who is part of the company, one of your advisors, a board member, somebody who can listen as well to make sure that you’re hearing what they’re saying.

Q: What are some unlikely ways to secure funding or access to resources?

A: Well, one that’s probably not thought of very frequently is actually customers, and that comes at multiple levels. But if you’ve done a really good job of qualifying your customers and can provide them with a clear path to a solution that they value, in many cases they’ll pay you in advance to build the product. Or they may give you a purchase order. Or in some cases they may actually invest in the company because it’s a meaningful solution that they’ve been looking for. So really going down that path has a lot of dividends because generally it’s cheaper money in the long run than investor money.

Another alternative is grant funding. Look for grants from the federal government, state government, and foundations that provide funding towards the development of products.

JumpStart Inc, CincyTech and Rev1 Ventures are partners of Ohio Third Frontier. To see other Ohio resources, check out our startup guide here.

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