April 28, 2007

Venture Farm Execution Workshop

We partnered with Sid Mohasseb (founder of Venture Farm and a member of the Tech Coast Angels) a few months back to put on a 2-day workshop on effective business execution. I spent the past 2 days participating in the workshop here in Costa Mesa, CA and here are the highlights:

  1. Build Meaning for your customers: Sid talked about how we are in an experienced economy which means people are looking for a valuable and emotional experience through your product or service (and they aren’t necessarily buying features or benefits). When you deliver a positive experience, you are delivering meaning to your customers (good examples of this = Apple, Starbucks). Upon deliverance the following will occur:
    1. You’ll have raving fans: most powerful & economical revenue generator (Apple iPod)
    2. Loyalty: stable revenue from existing customers (Starbucks = 80% of Starbuck’s revenues come from customers who frequent the store 18x per month)
    3. Premium Pricing: customers will gladly pay more for an experience that is emotionally rewarding.
  2. Learn how to work on the most important things (execute): To execute means to deliver meaning by spending your time, energy and resources on the most important projects.
  3. Effective Fundraising: Sid talked about knowing when and how to effectively raise capital.
    1. Understand the players in the space (angels, VCs, private equity, lenders, etc.) well enough to know exactly where to go to find financing.
    2. Think about the economics from the investor’s point of view (investors want to see a 10x return on their money). With your stated valuation and growth rate, can you reasonably build a company within 5-7 years to provide them with a reasonable return on their investment? TIP: assume that you’ll be able to sell your company for 5x your projected net income and see if their portion of the company will then produce a 10 return.

Every entrepreneur should take the 2 days to go through the Venture Farm Institute workshop. It was a fantastic learning experience for me and everyone else involved.




#8 — Identify Target Market & Marketing Strategy

Next on the list of “10 Signs of a Fundable Company” is 2-part:  1) Identify a target market, and 2) have a strong plan to penetrate that market.

Too often, entrepreneurs make a mistake by saying, “We are entering a $8 Billion market and all we have to do is get 0.1% of the market to make $8 Million in revenue!”  There are 2 problems with this statement:  1)  They are not referring to the Total Addressable Market and 2) they are taking a top-down approach to market penetration (which is very unrealistic).

Total Addressable Market: the precise market and customers that will purchase the product (not the entire market).

Once you have identified a market, the more important piece of the puzzle is to have a plan to penetrate that market.  If you don’t have a solid market penetration strategy, you’ll have a hard time raising capital.

TIP:  instead of selling customers one at a time, think about various channels or partners that already have relationships with many of your customers and sell through them.  Investors love to see such a plan because you can penetrate the market much faster.