SunstoneBusiness SchoolDr. Bennett McClellan

August 17, 2012

What is Strategy for a Entrepreneurial Startup?

WHAT ARE WE GOING TO COVER TODAY?

Three topics on entrepreneurial strategy:

1. How do I get the money?

2. How do I present my story?

3. How to I develop my business?

HOW DO I GET MY MONEY?

What’s a VC Look for?*

Entrepreneurial Chops – person, passion, past performance,

potential

Customer need – problem(s) the customer needs/wants to solve

Value proposition – what the customer will pay for, defines as

value

Unique resources – Material, people, organization, installed

base

Market attractiveness – unit economics, scalability, share

potential

Competitive intensity – current competitors, emerging

competitors

Ecosystem setting – those helping push the market, those

impeding it

External context and enabling factors – PEST,

macroeconomics

Defensible discontinuity – IP, processes, aggregations,

platforms, legal

*Interpreted with apologies from talk by Alok Mital, Canaan Partners – 11-2-12 Sunstone Business Schoolhttp://www.canaan.com/companies/india

HOW DO I GET PAID FOR MY IDEAS?

Product Cost

Differentiation Premium

Competitive Profit

Transaction Cost

Channel Cost

Rs

€

$

£

¥

Limited upside

Full extraction of value

NAME OF THE GAME IS WHERE’S THE PAIN?

“It’s about finding a pain. It’s the difference between a painkiller and a vitamin. Make sure what you have is a painkiller. To have a painkiller, you have to have a pain. When you find a pain, jump in. The more personally you feel the pain, the better you will build your product.”

Subinder Khurana, VC

1.What is it?

2.Who has it?

3.How much will they pay to get rid of it?

USER PAIN?

I’m going to tell you a story.

It begins with a Hero – someone with a burning need to do or accomplish something.

But standing in the way of the Hero and his goal is something that comes in his way – an obstacle or an opponent.

Not being able to achieve his goal causes our Hero great pain…pain we hope is shared with others.

This the PROBLEM you must solve.

INTELLECTUAL PROPERTY?

The story continues with our Hero making a plan:

It involves training

It involves enlisting allies

It involves hard work and self-sacrifice

Eventually our Hero develops what he believes he needs to overcome his opponent – the plan.

The plan is what you need to overcome the pain. It is your INTELLECTUAL PROPERTY – that which enables you to take away the pain.

ECONOMIC PAYOUT?

But plans must be tested against opponents.

Sometimes the plan works perfectly.

More often it does not work as hoped – defeat?

No! But the Hero must learn from his failure, do something differently, make a new plan, and train again for meeting the opponent.

At some point the Hero defeats the opponent.

He then celebrates victory!

This is the ECONOMIC PAYOUT.

WHAT DO I NEED TO DO TODAY?

Focus on answering the following questions:

1. What is the User Pain = UP?

2. What is your Intellectual Property = IP?

3. What is the likely Economic Payout = EP?

When your understanding of the pain is compelling enough, your plan for addressing the pain convincing enough, you will get the funds you need to test your plan in the market.

Entrepreneur

HOW DO ENTREPRENEURS MAKE STRATEGY?

Professional Strategist vs.

It’s a matter of dis-order: Shoot! Ready? Aim…

ARE THERE LOGICAL STEPS IN DETERMINING STRATEGY?

1. Customer perceived needs2. Drivers of market potential3. Required and unique resources4. Organization of value chain5. Relevant competitive dynamics6. Structure of ecosystem7. PEST/contextual factors 

Your Next Job: Find the gold under the Strategy Rainbow

HOW DOES STRATEGY LINK TO BUSINESS PLAN?

Elements of a Business Plan – from http://www.entrepreneur.com/startingabusiness/businessplans

Income statement

Cash flow

Balance sheet

Supporting schedules

Summary analysis

7. Financial Summaries6. Operating Model5. Design & Development4. Competitive Dynamics3. Marketing Strategy2. Market Assessment1. Business DescriptionExecutive SummaryBusiness Plan

TAKEAWAYS FROM TODAY?

1. Don’t focus on the money, focus on the pain

2. Find the pain, tell the story

3. Business Plan is your story unfolding