08.17.17

Early Stage Investment Basics

Karl R. LaPan, President and CEO of The NIIC

“No business plan ever survives first contact with a customer.” This is sage advice from start-up serial entreprenuer and author Steve Blank. The days are gone when a start-up has a 150 page polished and bound business plan. Today, ideas are a dime a dozen so unless you have actively engaged in customer discovery and validation activities to find a robust business model to create and capture “value”, you just have an idea. Furthermore, unless you know your customer’s pain, or you have discovered their needs (and validated these needs), there really is little chance an outside investor will take you or your venture seriously.

Keep in mind the following early stage investment basics:

  • You only need a business plan if you are raising external capital or applying for a traditional bank loan. For everyone else, an expanded executive summary and some lean canvases with actual field work, experimentation and customer feedback will be sufficient to get the conversation started.
  • Only 1 in 7 early stage start-ups actually achieve any level of funding for their startup venture. There better be something unique, special or different about your business concept or model. Recognize you are competing and having a good idea is just the admissions ticket, it doesn’t get you on the rides. What is your secret sauce?
  • The strength and validity of your business model is more important than having a written business plan. Most successful Inc 500 founders never had a written business plan.
  • Thinking and doing, iterating and learning are the business fundamentals your scrappy startup should embrace today.
  • Unless you are in an entrepreneurial hot spot – Austin, Cambridge, or Palo Alto, there are more ideas chasing investors than the other way around.However, keep in mind we still don’t have enough entrepreneurs in the world no matter how you slice it.
  • Don’t use “coastal” valuations as the basis for a middle-America investment opportunity. It just doesn’t work that way. It is unlikely and improbable that your napkin drawing or rough sketch is worth as much as you think it is.
  • Be realistic. No one is going to give you a Brink’s truck of money based on your idea. Your track record, management bench strength, ability to hit milestones and how you de-risk your venture will matter more to an investor than a rosey set of unrealistic hockey stick financial projections. At a recent ACA event, one speaker said the key three things (in order) that matter are: market (is it attractive?) enough; management (is it good enough?); and product (does it truly solve a customer segment’s pain/problem?)

The NIICs passion is to be rocket fuel for great ideas, companies and people. If you’re an entrepreneur who’s serious about bringing an idea to life, we’re serious about working with you. The NIIC is our community’s most comprehensive resource for people of substance wanting to work with a place of substance. Credibility, community and competence accurately describe the people and place many successful founders call The NIIC home. Don’t leave your business idea to chance, work with the trusted source known for advancing you and your business venture.

At the NIIC, you’ll learn the entrepreneurial business-building process and connect with other like-minded business builders, and when you’re ready to get started, we are too.

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