Are you ready to raise money for your startup?
Leslie Mitts, Managing Practice Leader at the Wharton SBDC and Lead Advi sor for the Wharton Venture Initiation Program, tells us that most entrepreneurs coming through her programs are focused on raising capital , even though there are higher priorities in many of theirbusinesses. Si nce fresh dollars help drive the business engine, this is a natural entr epreneurial concern. But are you ready to raise money? Going to investor s before you are really ready can damage your reputation and may actually hinder future funding efforts. Team and a Dream uses a unique Fundability Diagnostic to help companies assess their strengths in four key area s:
Team – This is the most frequently cited attribute examined by investors. Many investors will invest in an A-level team and a B-level product, but not the opposite. Having your Seed Team nailed is crucial.
Traction – Showing momentum is a critical element to demonstrating progr>ess and your ability to execute.
Perceived Pain – Do people really need your product? Why? Will they need> it in the future? Product Ecosystem – How does your product fit into existing and emerging landscapes? Who else is out there and how big will this market grow?
Find out what you need to succeed and discover your roadmap to getting t here. Take the quiz below to see how well you might expect to score with investors. For each of the four sections outlined above, see which hur dles you can clear given the current state of your business.
PROCEED WITH CAUTION: Only self- aware entrepreneurs should take these re>sults seriously.
ASSESSING YOUR TEAM
Part A: If you or any member of your current team are not planning on being the CEO, give yourself two points and proceed to Part B. If someone on your team IS planning to continue on as CEO, then you?ll n eed to answer yes to both of the next two questions in order to score two points; otherwise, take a zero.
A1.Our CEO has significant, previous management experience in a startup or comparable operating environment (i.e. middle management in a large company doesn?t count!) ( 1 point)
A2.Our CEO is able to rapidly assess and prioritize our work with the re spect of the team ( 1 point)
Part B:
Score one point for each answer.
B1.Someone on my team has significant experience in the domain space in which we are starting the company ( 1 point)
B2. Our team understands and acts as if they understand the difference be tween tasks that are urgent, urgent and important, important, and none o f the above ( 1 point)
B3.This team has terrific chemistry ( 1 point) Your score (0-5) is your Total Team Score. If you scored three or more, you pass the Team Hurdle. TRACTION Score one point for each item you can answer positively.
1.We have made a few initial sales and have positive indicators from the marketplace for additional sales growth ( 1 point)
2.So many good things are happening I am bouncing off the walls with exc itement ( 1 point)
3.I have added a significant team member (besides myself!) in the past t wo months ( 1 point)
4.In the past two months, I received press coverage that would be acknow ledged by my prospects as legitimate business coverage ( 1 point)
5.We recently have achieved a significant product or marketplace milestone (includes a single, initial sale) ( 1 point)
Your score (0-5) is your Total Traction Score. If you scored three or more, you pass the Traction Hurdle.
PERCEIVED PAIN
Award your Team the number of points indicated after each question that you answer positively.
1.My product or service solves an important problem for a well defined g roup of people ( 2 points)
2.My product or service will be in great demand in the future in order t o solve problems emerging from a new trend that has a large population o f prospects ( 2 points)
3.My product or service takes advantage of newly available market forces (technology, demographics, societal). The result is an offering that w ill clearly appeal to an existing, well- known market demographic ( 1 poi>nt) Your score (0-5) is your Total Perceived Pain Score. If you scored three or more, you pass the Perceived Pain Hurdle.
PRODUCT ECO-SYSTEM
Score the stated number of points for each item you can answer positivel y.
1.My product is unique in a clearly defined (i.e. I can describe the dif ference in one or two clear sentences) and useful way ( 1 point)
2.My product is patented or can easily be patented or I have another com petitive barrier (e.g. trade secret, unique manufacturing process, etc.) that will make it difficult for others to compete directly ( 1 point)
3.My marketplace is well established but fragmented or my product has ? category killer? potential because it is so unique to the market ( 1 poi nt)
4.My marketplace is either very big (> $5 billion/year in sales) with cl ear room for a product like mine or is rapidly growing with well documen ted trend lines ( 1 point)
5.My marketplace is wide open and there are no competitors ( subtract 1 point)
Your score of (-1 to 4) is your Total Product Eco-System Score. If you scored three or more, you pass the Product Eco-System Hurdle. Now that you have completed the scoring, we s hall take a look at how ?fu ndable? your company is. Before we do, it?s important to realize that t his is a snapshot in time. If you are not satisfied with your score, th ere are plenty of things you can do to improve it. I?ve seen many of my clients make tremendous progress along these dimensions by extending th eir team, focusing on sales or tweaking their offering.
YOUR FUNDABILITY RATING:
Number of Hurdles Cleared: None
IMPLICATION
If you received this score and hope to receive funding, then you have a lot of work to do.
Perhaps you just know you want to start a business and are looking for i deas. If so, keep these criteria in mind as you formulate your plans. If you already have a business concept, you should think long and hard a bout ?reconceiving? some elements of it to improve your scores. Many perfectly good ?lifestyle? businesses may fall into this scale ? yo u just can?t get funding for them.
Number of Hurdles Cleared: One
IMPLICATION
Funding from your rich uncle may be possible Number of Hurdles Cleared: two IMPLICATION Funding from family and friends network may be possible Number of Hurdles Cleared: three
IMPLICATION
Professional investors will consider this, but you?ll need to be prepared to explain how you?ll address your gaps. Number of Hurdles Cleared: all four
IMPLICATION
Put the finishing touches on your business plan and hit the funding trai l!
You will have the best chances of success in fund- raising if investors s>ee that you can clear the hurdles in all four areas.
NOTE: Team and a Dream offers a professional version of this assessment that offers additional detail and examines nuances that aren?t possible to convey in a simple quiz. If you have an interest in the professional assessment, please visit us at
http://www.teamandadream.com/contactus.htm
As an advisor-builder with a sense of adventure, Skip Shuda has worked with numerous startups since 1983, including Destiny WebSolutions, which he founded in 1994.
Today Skip enjoys working with technology startups and using his experience, lessons and tools to assist fellow entrepreneurs.
He works with private clients as well as Wharton SBDC clients as a VIP advisor.
http://www.teamandadream.com