Growing From A Seed

Common threads among the successful businesses we have financed:

Understanding the customer

Get to know your customers. Spend time and gain an understanding of important issues such as the customer's decision-making processes, budgeting parameters, and technology constraints. Make an effort to determine the customer's potential switching costs, support requirements, and best channels for communication, then articulate your value proposition.

Be certain to understand what your customers want and how you can provide it to them. Do not focus on features while neglecting the advantages and benefits of those features. Understand the economics your customer faces and their strategic imperative. Is your product tactical or strategic, company-wide or departmental? Know your competition and how your value proposition compares to theirs. Support your value proposition through credible external sources, such as industry analysts, consultants, and business press.

Build a strong reference list

Actual satisfied customers are obviously the best references, but "virtual customers" are still valuable. Even qualified prospects can be powerful advocates during the early stage of a new product concept. Before you list references, test them on key questions.

Build a strong advisory board

Most seed stage companies are short of experienced management staff. Leveraging your talent base with outside resources is a must. Start with strong professional advisors. Obtain reliable information on how to structure your company, hiring high-quality people, and finding capital sources. Add depth and experience to your team with outside advisors. Outside advisors can be helpful and validate the business as long as they have sufficient time to devote your project. Discuss their availability in advance. The ability to recruit a strong board of directors and/or advisory board is a good leading indicator of the management team's leadership skills.

If you have a choice among investors, determine their relevant experience. Do they have operating experience? Will you be able to build a successful working relationship with them? Do they have the time to commit to your startup? How many boards are they on?

Focus on management experience

If you cannot get a full time commitment initially from key contributors, consider recruiting "virtual" team members. The best alternative is to have them commit to join subject to certain milestones (e.g. raising a certain level of funding). Focus on finding relevant industry experience. Be relentless in landing the very best available talent. Of all the variables that you control, your executive team is the most likely to directly affect shareholder value.