Strategy & Starting Up

This section covers the issues that you will likely face in the first stages of trying to start a company: from developing and validating an idea worth building a business around, to nailing down and adapting your business model. Once your business is more developed, the section's strategy-related topics will help you grow your business and tackle any obstacles you may face.


Ideas »

All companies originate with an idea. It might seem that ideas magically pop into a founder's mind, but some of the best company ideas have been generated through a deliberate process. Once you've discovered a good idea, your intuition might direct you to keep it secret. But experts generally recommend that you share your idea in order to get feedback that can be crucial to propelling your idea, and business, to the next level. This section covers these matters and more. 

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Ideas

Chris Dixon

Founder/market fit means the founders have a deep understanding of the market they are entering, and are people who ‘personify their product, business and ultimately their company.

 

Chris Dixon

Almost anything you build on the web has already been tried in one form or another. This should not deter you. Antecedents existed for Google, Facebook, Groupon, and almost every other tech startup that has succeeded since the dot-com bubble. Entrepreneurs should always ask themselves “why will I succeed where others failed?” If the answer is simply “I’m doing it right” or “I’m smarter,” you are probably underestimating your antecedents.

 


Starting Up »

Starting Up covers what you will likely face in the first stages of starting your business. From forming a legal entity to shield yourself from liability, to validating your business concept to ensure your addressing a real problem, considering the issues covered in this section can immediately save you time and money.

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Starting Up

Mark Suster 

Put simply – you need enough users in a segment who care about what you’re doing to dictate investing further in the product or in sales & marketing resources. If you solve a deep problem for a niche user group but not enough users have the problem you won’t achieve product / market fit. Or if you solve a problem for a big segment but your solution isn’t significantly better than alternatives – you won’t have a fast-growing, successful business. I often call this “going a mile wide and an inch deep.” The answer to either problem may mean simply refining your product to solve deeper problems or expanding the product scope to meet a larger group of customers’ needs.

 

Babak Nivi

If the service provider’s duty is to eliminate the frictions in the startup’s journey, then it is the entrepreneur’s duty to only start companies that can make a meaningful contribution to the advancement of humankind. That means saying no to businesses that are the Internet equivalent of McDonald’s. And it is our duty as entrepreneurs to never sell, shut down or give up until we’re delivering innovation at scale.

 


Launching & Updating »

This section covers the launch of your business, product and any updates or new products you release through the life of your business. The topics might seem straightforward, but launching a product when it is imperfect—which many experts urge startups to do—can be a tough thing to swallow out of fear of turning off potential users and customers. Marketing a launch and dealing with press during a launch are also important topics that can be crucial to gaining early momentum for your products. 

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Launching & Updating

 Chris Dixon

The first time the VC community / tech press gets excited about the company, they are already so successful that it’s hard for competitors to jump in.

 

Mark Suster   

Too many startup execs place too much emphasis on the big stage launch.  There are many problems with this.

 


Revenue Model Types »

A "revenue model is the system design by which a business monetizes its services." (Wikipedia via Fred Wilson). In other words, it's the overall mechanism and process by which a business makes money. For some products, the applicable revenue model will be obvious. But for others, a path towards monetization may not be clear, so a good understanding of common methods to monetize your service is helpful. This section covers these methods.

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Revenue Model Types

Fred Wilson 

Gaming isn't a revenue model itself, but it does offer a number of interesting revenue models and is worth discussing in a post in this series.

 

Fred Wilson 

As attractive as selling apps and running ads on them is, I believe the biggest and most attractive model in mobile is the transaction. Slowly but surely, our phone is becoming our wallet. And I don't mean wallet in the way that Google and PayPal think. I don't think we will necessarily have a mobile wallet. I think the apps on the phones will just have native transaction capability in them.

 


Business Sustainability »

Through the course of a business it might become necessary, or simply potentially more fruitful, to change the overall direction of the business or its main products. Market conditions may change, new opportunities arise, or internal matters affect the business's capabilities. In such circumstances, grasping concepts such as "pivoting" and "adaptability"—covered in this section—will help your business progress forward.

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Business Sustainability

Fred Wilson 

If the folks who allocate capital in our society - venture capitalists, hedge fund managers, mutual fund managers, etc - are using IRR, ROCE, RONA, then they are going to allocate capital to companies that are making efficiency oriented investments, not empowering investments. And our society will continue to be awash in capital with no game changing  empowering investments that create new industries. Clay suggests that we measure our returns in "dollars in dollars out" and forget about time, " profit as dollars, yen or renminbi". That's they way I was taught the venture capital business back in the 80s. Cash on cash, dollars in dollars out. That's what matters. If it takes a decade or more, who cares?

 

Fred Wilson 

Think about what your key value proposition is and who is your primary customer and focus on that. And think about what you can do in your revenue model to make it so that it will be hard for others to come in and undercut you. And think about your cost model and how to keep it as low as possible while allowing your company to be best in class at what it does.

 


Strategy »

As Fred Wilson puts it, "strategy takes what you want to achieve and develops a plan to get there." Essentially, a strategy is a set of tactics you use to mobilize and focus your startup to achieve your goals. Typically, a startup strategy is focused on achieving growth. This section is chock-full of resources to help you get started on setting and executing a strategy. 

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Strategy

Fred Wilson 

The power of focusing should be at the top of [your] list. When you focus, you can rid yourself of extraneous expenses (Jobs laid off over 3,000 people in his turnaround of Apple), you can get your best people focused on the important projects, and you can bring clarity to your marketing and what you want the consumer/customer to think of you for. Many entrepreneurs and CEOs misjudge how many things they and their team can do well. It is always less than you think.

 

 Fred Wilson

Don't think you are going to win in business with a better product, more capital, or a bigger team. You can't just throw resources at a market and expect to win. The winner in a market most often has the best strategy and exectutes it well.

 


Budgeting, Projecting & Burn Rate »

This section covers strategic planning as it relates to available funds and budget constraints. It also covers the important metric of Burn Rate, including best practices on setting a burn rate and calculating one.

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Budgeting, Projecting & Burn Rate

Fred Wilson 

The budgeting process is really critical in a large company. It forces the company to make highly informed decisions about investments and resource allocation and it creates company wide discipline around hitting goals. I have never seen a company of 150 employees or more operate functionally without a strong budget process.

 

 Chris Dixon

High growth, early-stage tech companies often have a choice about how to become exceptionally valuable businesses: they can focus on growing revenues at the expense of margins, or margins at the expense of revenues.

 


Pricing »

This section covers all aspects of pricing products and services, from determining standard prices to offering sales, discounts, and freemium products. 

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Pricing

 Chris Dixon

In almost every two-sided market, one side is harder to acquire than the other. The most common way to attract the hard side is the ladies’ night strategy: reduce prices for the hard side, even to zero (e.g. Adobe Flash & PDF for end-users), or below zero (e.g. party promotors paying celebrities to attend).

 

Chris Dixon

Enterprise-focused VC’s sometimes refer to products priced between (roughly) $5k and $100K as falling in the “valley of death.” Above $100K, you might be able to make a profit given the cost of sales. Below $5k you might be able to market your product, hence have a very low cost of sales. In between, you need to do sales but it’s hard to do it profitably.

 


Handling Competition »

While competition presents obvious challenges to any business, it also presents opportunities to grow your business—team motivation, competitor cooperation, and getting acquired are just some examples of how. This section covers these matters, and other areas such as how to handle competitor success.

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Handling Competition

Fred Wilson

Companies derive competitive advantage from how an organization produces its products, how it acts within a market relative to its competitors, or other aspects of the business.

 

 Brad Feld

Building the “best product” doesn’t only mean the best physical product (or digital product). It doesn’t just mean the best UI. Or the best UX. It includes the best distribution. The best supply chain. The best customer experience. The best support. The best partner channel. The best interface to a prospective customer.

 


Crisis Management »

A crisis can certainly send shockwaves through your startup. Knowing how to deal with, but more importantly to learn from, a crisis will help ensure that your business survives and prevents problems down the road. This section will help you navigate any problem facing your business.

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Crisis Management

Fred Wilson

When something goes badly in your company, for many the initial instinct is to keep things under wraps as much as possible to avoid freaking everyone out. I would argue that it is better to acknowledge the crisis and use it to your advantage. Change is hard to bring to an organization and a time of crisis is often a perfect time to make some changes that you have wanted to make for a while. It creates a perfect backdrop and context for doing that.

 

Mark Suster

I HATE LOSING. I hate it.  I really, really, really hate it.  It chaps my hide.  It rips at my core. I don’t get over it easily.  I lose sleep.  I fucking hate losing.  It’s not so much the actual outcome that I hate – it’s the process.  The fact that I lost when I should have won. I think about it for months, often years.  But I embrace losing.  It is how I learn.  I relive the moment so many times over in my mind wondering if I could have done this differently or if I shouldn’t have said or done this or that.  I talk to trusted sources about it.  I ask for feedback.  I hate losing.  I don’t want to lose next time.