Blog: What I Learned at Entrepreneur Programme: It's all about Team, Market and Product
I joined - as an observer- the Astia Global Entrepreneur Program’s 2012 Summer Cohort, held in New York City. Twelve exceptional women-led ventures attended this weeklong intensive boot camp. On the third day, there were two panels in the morning. The first, Developing a blueprint for fundraising, with panelists from various investors, including DFJ Gotham and Edison Ventures. Great insights, which I want to share with you:
Investment in early stage companies: Team, Market, and Product
DFJ Gotham invests in early stage companies, versus Edison’s expansion stage investments, when companies have about $5-$20mm in annual revenues. Their perspectives were a helpful counterpoint, with one investor saying having very little information about revenues when investing, whereas others commenting that in their meetings “we spend only 30 seconds on Product, since the market is already proving it’s viable.”
The panel touched on the topics of Team, Market, and Product, and then some Q&A.
Regarding Team, one investor spoke about their very deep involvement, wanting to be “the first call the founder makes [outside the company] with really good or really bad news.”
Both emphasized the importance that there be something uniquely special about what the entrepreneur brings to table, other than the business idea.
All also cited a that one of the biggest risks is on execution, so it’s super helpful if the founding team has worked together already. In evaluating investments, relevant experience was also referenced as being extremely important.
In the second area, Market, an investor questioned whether a company’s offering is “need to have” versus “nice to have.”
“Is something a business or a feature?” There a point made to the risk that a dominant player could make a small change which would suddenly obviate the startup’s business.
The panelists diverged in investment focus, however. DFJ looks at enormous markets of $1b a year or more, but Edison will sometimes look at a firm that dominates a niche, even as small as a $200mm market, as there’s often less competition and possibly less capital required.
One of the investors then noted a frequent mistake entrepreneurs make in pitches, incorrectly referencing what the "addressable market" is, namely, what you could get in revenue if you had the entire market. I.e., how many units could be sold and what you think price is: units times price equals the addressable market.
Thus, statistics about the size of the “advertising market” or “healthcare market” aren’t as relevant unless the firm could capture all of it.
In the third section before the Q&A, the investors addressed entrepreneurs’ presentation of Product. They said that what might make a firm "unique" might not be the product’s feature comparison, but could instead be the delivery mechanism or market focus.
One investor looks at things like Net promoter score and retention metrics as a way of evaluating a firm’s product offering, saying ideally half its growth will come from existing customers. Meanwhile, there was also reference to the Lean Startup model, focusing on launching the product and then iterating.
In the Q&A, someone asked about valuations and ownership potential. it was advised to working backwards, determining what constitutes a success – what will the business sell for in five years. What's the return profile to the investor to make it worthwhile, etc.
Entrepreneurs think of fundraising as a matching process, not a sales process.
Finally, in this session and others, many people have stressed the importance of getting a good attorney who knows the startup scene and/or technology:)
Luke Haseloff is an entrepreneur who also works part-time doing “freelance business development” for tech startups; he joined the inaugural Astia Global Entrepreneur Program’s 2012 Summer Cohort, held on June 25-29, 2012 in New York City as an observer. Astia is a global non-profit accelerator with a mission to propel women-led high-growth ventures, and Astia’s tag line, “Where Women Innovators Succeed,” says it all.Twelve exceptional women-led ventures, carefully selected by the Astia community, will attend this weeklong intensive boot camp. After the Summer Cohort, the startups will be mentored for three months.
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