Business Strategy Tips
As part of our research into business incubators and accelerators, we talked with Greenberg Traurig LLP Intellectual Property Attorney Chinh Pham, whose firm is one of many providing in-kind support services for participants in MassChallenge, a Boston-area accelerator, partnered with Startup America, that calls itself the largest accelerator competition in the world.
As one measure of the program’s value, MassChallenge notes that the 111 startups supported in the 2010 accelerator raised over $100M in outside funding and created about 500 new jobs in under 12 months.
We talked with Mr. Pham about the opportunity and challenge of developing an accelerator program in Boston. Read more
While researching our feature on the value of Incubators and Accelerators for startups, we got in touch with Tracy Kitts, Acting CEO of the National Business Incubators Association (NBIA), which bills itself as the world’s leading organization advancing business incubation and entrepreneurship. We had a few questions for him.
How do you meaningfully compare the outcomes of businesses that have gone through the incubator model and those that haven’t?
Researchers are continuing to try to look at the results of companies that go through a program in a specific community and those that don’t. There are just so many variables at play. The best we can do is to take a look at return on investment… Read more
While researching a feature on business incubators and accelerators, we came across Chris Hexton, an entrepreneur with Invc.me who has been through the accelerator process and was able to share insight from his own experience.
Having recently progressed through the Sydney-based accelerator Startmate I can safely say that it has certainly been one of the most worthwhile experiences of my life – both for my startup and myself personally.
Before joining Startmate my business partner and I ran our own consultancy and Invc.me (our startup product) was nothing more than a pre-alpha prototype that we used internally. We had no real plan and no real momentum. Things are a lot very different now and, upon reﬂection, I feel there are there are three key things that we have learnt through Startmate that have changed our approach to building a product.
1. Focus. It’s not impossible to build a startup on the side whilst maintaining a day job but, having tried both, I can attest to the fact that spending 3-4 weeks solidly testing your concept and assumption with real customers is the best way to ﬁgure out if you startup has any chance of success. Bootstrapping is a ﬁne way to fund your startup but in the future I know I will always take a few weeks to spend 80% or more of my time validating a concept new concept before I go any further. Read more
I’ve got a lot of respect for the ideas presented in author and entrepreneur Alexander Osterwalder’s Stanford University series on the business model canvas. As he points out (and as I try to remind my clients), “great products are becoming a commodity. It’s the combination between great products and a great business model that is going to keep you ahead of the competition in the coming decade.” Read more
Innovation is about more than making giant, well-publicized leaps. It’s about striving for continuous incremental innovation to improve your offerings and keep on top of changes in your industry – and plenty of entrepreneurs could be doing this better.
Particularly in Canada, entrepreneurs have a problem making innovation pay. Research at Canadian universities tripled from $1.7 billion in 1999 to $5.5 billion in 2008, but revenues earned from their patents were significantly lower than what was earned by their European and American counterparts. The developers of these technologies are having trouble bringing their solution to market.
Established corporations can also face an innovation gap that is only partly explained by complacency. Some examples include Kodak, RIM and Xerox:
- Kodak had built up a multi-billion dollar company with a global brand years before digital photography came on to the market, sticking with film. It’s Japanese competitors saw where the market was headed. Today, Kodak has filed for bankruptcy.
- RIM’s meteoric rise was stunning, seeing the mobile business platform pioneer go from nothing to $10 billion in revenues after just 15 years. But Apple and Google-based smartphones were nipping at its heels. Despite its lead, RIM failed to match the browser experience or touchscreen capabilities of its competitors and its share price has dwindled to a small fraction of what it was.
- Xerox PARC was he innovation heart for its company, developing a mouse and user interface integration that was revolutionary for its time. Xerox didn’t know what they had, but Steve Jobs of Apple did, running with the innovation in Apple’s own Macintosh product. At this point, it’s impossible to say precisely how much revenue Xerox has given up over the years from this blunder, but it’s safe to say that it was a lot.
Innovating is hard, but recognizing a truly innovative technology for what it is and selling it is a common entrepreneurial challenge. Sometimes, the problem is packaging; entrepreneurs don’t know how to sell what they’ve got. Other entrepreneurs struggle with putting together a business plan around a technology. As we’ve seen, it’s not a problem confined to new business startups; but ideally, entrepreneurs who understand how to capitalize on innovation when starting out can instill that vision in their team as the company grows.
The North American consumer is addicted to low prices when it comes to plenty of kinds of consumer goods, but companies are wise to heed Guy Kawasaki’s strategic advice: price isn’t everything – and value is different from price.
Writing recently on what he had learned from Steve Jobs, Kawasaki wrote that “Price is not all that matters-what is important, at least to some people, is value. And value takes into account training, support and the intrinsic joy of using the best tool that’s made. It’s pretty safe to say that no one buys Apple products because of their low price.
Apple is far from the only company that has profited by providing value for its customers rather than a single-minded focus on the price tag.
Nobody buys Prius cars because they’re cheap – even with government subsidies, these eco-friendly cars that are tapping into a style-conscious and green-minded consumer are not inexpensive. And think about how much people are willing to pay for Hallmark cards, simple paper products, that can go for $5 or $6 each. Cost-conscious buyers could pick up a whole box of cards at a dollar store for the same price, or even send a message for free with an eCard, but Hallmark’s well-written passages keep drawing people back for more.
What is the value that you are providing for your target consumer? The question will keep popping up when:
- putting together your business plan
- hiring employees – how will your people help create the value you want to offer? Specialized skills that your competitors don’t have? Customer service?
- understanding your company’s strengths and weaknesses. How does the value you help cover over the gaps?
- presenting to investors. Does your PDF presentation talk about the value you’re offering? What pain point are you helping your customers with?
You can’t entirely neglect price. It’s an important part of your overall business plan. But as Kawasaki would point out, taking part in a race to the bottom in terms of pricing hasn’t helped virtually every Apple competitor overcome the giant’s value proposition. While they’re struggling to achieve profit margins of 5 to 8 percent, Apple’s profit margin is closer to 30 percent – and that’s the value of focusing on value.
This is not as well understood among entrepreneurs as you might hope. I have two clients who recently came to me to look at their proposed share structure because they had an inkling something was off. They were right. The share structure included non-voting shares – that’s a non-starter when it comes to raising money. After all, who is going to buy non-voting shares in a company?
The basics of a shareholder agreement and corporate governance
For those who may not be entirely sure what a shareholder agreement is, let’s go over some basics. The shareholder agreement sets basic rules about how the company is governed. For instance:
- Who sits on the board?
- How are directors selected?
- When can shareholders sell their shares?
- Can shareholders be forced to sell their shares?
- Who has the authority to make certain kinds of major decisions for the company, such as changing the firm’s strategic direction?
The shareholders agreement is a vital document for a private company. After a company goes public, that company will be governed by securities regulations.
A self-publisher of a web-comic asked for $57,000 on Kickstarter to reprint a series of comic strips and raised ten times as much from more than 7,000 backers – with two weeks to go before the funding drive ended. Meanwhile, a new fashion company took in over $64,000 from nearly 800 funders to launch their new line of multi-functional fabrics – tripling the amount they initially asked for. Clearly, the age of crowdsourced funding has arrived; it’s time Canadian entrepreneurs started examining the possibilities. Actually, they are.
Crowdfunding for new companies and established ventures
Crowdfunding, otherwise known as crowdsourcing, as an alternative source for funding companies is getting more attention these days, since the US Senate has got on board in November with the “Entrepreneur Access to Capital Act”.
According to Forbes Magazine, the legislation allows companies to bypass dated regulations to take advantage of the flourishing online fundraising economy. Specifically:
The bill provides a crowd funding exemption from Securities and Exchange Commission registration of securities offerings, with certain limitations: Read more