Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, Vision, Strategy and Tactics will Take You on the Road to Success

“Ready, fire, aim” is the approach most entrepreneurs take to developing their start-up companies from the ground up.  They do not do any planning or have a vision in which to base their follow-on strategy and tactics to develop their “concept” or “idea” into a fundable business proposition.  This approach to initiating your start-up company will not take you on the road to success in the market.  What it will do, is to lead you down a meandering path to various dead ends and re-starts only to result in frustration, lost time and a lack of focus.  By beginning with a vision for your start-up company and its “concept” or “idea”, this will allow you to necessarily to create a top-down focus from the beginning and help when you initiate your strategy to entering the market and the follow-on and measurable tactics to implement your execution plans. In what follows is a short discussion regarding the requirements of developing a vision, strategy, and tactics to take you on the road to success in the market.

Create a Vision

When Henry Ford started the Ford Motor Company he had a concept and an associated vision to develop inexpensive automobiles for the masses.  He had observed that most if not all automobile companies of the day focused on developing automobiles for the rich, but he wanted to bring these same advantages and privileges that went along with owning an automobile to common folks.  So, his vision, from the beginning, was to develop an automobile company that was clearly differentiated from the other automobile companies of the time that focused on low volume production of expensive cars for the rich. Henry Ford’s original concept and vision was to develop a high volume production automobile company that focused on producing low cost automobiles.  This was unheard of at the time and seemed virtually impossible given the “state-of-art” of production methods at the time.  But with this vision and focus, he set out to accomplish this goal – develop a low cost automobile for the masses. This same top-down visionary-based approach to developing a start-up company should be emulated by today’s entrepreneur.  By developing a concept and vision you create focus and do not get distracted by other market opportunities that do not fit your vision, but only focus on developing the a product offering that satisfies the vision and long-term goals of your start-up company. Anything less will result in distractions and not allow you to focus on your vision, take you down many dead-end paths and not provide a road to success for your start-up company.

Develop a Strategy

Once you have a vision, you need to focus on developing a corporate strategy to follow this vision.  With the goal of developing a low-cost automobile, Henry Ford’s overall strategy was to become the “lowest cost” manufacturer in the automobile business. This meant:

  • Developing an automobile design that had a low bill-of-materials cost,
  • Develop a simplified manufacturing process,
  • Lower corporate overhead and
  • Minimize channel costs.

No one individual item would result in becoming the lowest cost manufacturer in the market, but all of these things together would result in implementing his strategy of becoming the “low cost” automobile manufacturer in the market.  So, as an entrepreneur you need to focus on developing a strategy that uniquely positions your start-up company in the market.  Do you provide the best service?  Do you offer a unique user experience? Do the most value to your targeted customers?  By developing a strategy that follows the vision for your start-up company this will allow you as an entrepreneur to focus and uniquely position your start-up company and its product offering in the market.

Define Your Tactics

While vision and strategy together set the direction of your start-up company, it is the definable and measureable tactics that are used to implement a successful vision and strategy.  In the case of Henry Ford and the Ford Motor Company, the overall measureable tactics were associated with the “cost” of producing an automobile. While Henry had had some success with his low cost strategy for producing an automobile for the masses, it was not until he moved from a “work group” production line to a “specialized task” production line when his goal of developing and producing the industry’s “low-cost” automobile was achieved.  The idea for this “specialized task” production line was taken from his visit to a meat packing company in Chicago.  By implementing similar production tactics of “specialized tasks”, common in the meat packing industry, into his automobile production line, Henry Ford was able to achieve his vision of producing the lowest cost automobiles for the masses. This tactic truly differentiated the Ford Motor Company at the turn of the 20th century and allowed it to produce products for its target market – the consumer masses.  Today’s entrepreneurs also need to develop measurable tactics to support their company’s vision and strategy.  This will again provide focus and allow for measurable results that can be quantified and move them toward success in the market.

Entrepreneurs often take a “ready, fire, aim” approach to developing their start-up companies from the ground up. This approach to the market is does not provide focus and will result in a start-up company meandering and as a result losing valuable time and  energy focusing on market opportunities the do not make sense for your start-up company.  Alternatively, by taking time to plan and start from a “concept” and vision for your start-up company and then following this with an associated strategy and the appropriate tactics, this will allow you to develop a straight forward path and create a differentiated start-up company and product offering in the market.  In addition, this will also substantially increase your chances for success in the market.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.

June 28, 2010 Posted by | Venture Capital | , , , , , , | Leave a comment

Investors Don’t Fund Your Start-up Only to Have You to Figure Out What to do Next

Most entrepreneurs come to investors with an “idea” or “concept”, looking to receive investor’s monies only to allow them to figure out what to do next.    This is a very misplaced approach and is guaranteed to turn investors off.  With this approach, more often than not, you will get an immediate rejection with no explanation. Why? Because, investors are very busy and only interested in only the most well developed and presented investment opportunities. Something that is not well thought through and or properly presented will not get their attention or their monies.  This should be understood by all entrepreneurs that approach angel investors or venture capitalists. As such, investors don’t fund start-up companies only to have you figure out what to do next.  They fund you to execute a well thought through plan.  To accomplish this, you need to do your planning, develop a business plan and be ready to execute.  If you do this, you will greatly improve your potential for not only getting potential investor’s attention, and you will also increase your chances of receiving funding from these same investors.

Do Your Planning

Doing planning is the most important and time consuming, arduous task an entrepreneur needs to take on.  This is something you need to do early, as waiting to do your appropriate planning will only send your start-up company in the wrong direction and require you start over, causing you to lose valuable time.  Planning is difficult for most entrepreneurs, as more often than not they want to start writing their business plan day one.  This is a huge mistake, because if you do not have the appropriate information, at your disposal, you will not come to the right conclusions regarding how, and in what direction to move your start-up company and its technology, product or service offering forward. Therefore, take up to two months to properly research and secure the appropriate information that will help you develop a well thought through business plan.  This includes:

  • Determining your proprietary technology, product or service offering,
  • Identifying the general trends and strategic opportunistic needs of the market,
  • Identifying a set of target markets and their growth projections,
  • Analyzing the competitors within your targeted markets,
  • Developing basic market entry strategy and tactics, and
  • Understanding the basic financial model of the targeted markets.

By spending the appropriate amount of time doing your planning up front, you will develop a vision, focus, and direction for your start-up company. On the other hand, if you expect potential investors to fund you to do this early planning work, you will be sadly disappointed.

Develop a Business Plan

After you have spent the time to appropriately plan the early stages of your start-up company, you need to put together a well thought through business plan that takes in all of this planning information. This plan will be much easier to write at this point because you have taken the time to secure the necessary information.  Now, you just need to take the necessary time to put it on paper.  This is also a very big task, and it again will take a significant amount of time and effort. But, if and until, you put your business plan on paper, your start-up company will remain “in the ether”.  As, it is only when you begin to put your business plan on paper do you have the ability to identify issues, holes and other items that need to be addressed to complete your business plan. So, take the necessary time to develop a will presented and thought through business plan, you will learn a lot in the process and many times provide yourself will essential insights on how and in which direction to move your start-up company forward.  Finally, ignore those individuals that tell you that today investors do not read business plans.  While, in some cases, this may be true, it should be remembered the writing and development of a well thought thorough business plan will again provide you with the necessary insights that will provide your start-up company with significant advantages when you finally go to market.  Remember, take the time to develop a well thought through business plan it will serve you well when you go to secure funding from potential investors.

Be Ready To Execute

By the time you begin to talk with investors, you should be ready to execute your business plan. To be ready for this, you need to have:

  • Identified and talked with your target customers,
  • Secured a well seasoned “A- level” executive team,
  • Secured relationships with any necessary strategic partners, and
  • Developed a well thought through and developed go to market strategy and associated tactics.

By doing this you will have identified many, if not most of the issues that could possibly cause your start-up company to stumble out of the gate.  You will also have put your start-up company in a strong competitive position which will allow you to execute and rapidly secure customers and revenue. This will impress your potential investors and get their attention.  Remember, investors do not fund you to figure things out, they fund you to execute.

Most entrepreneurs come to investors with an “idea” or “concept”, only looking to receive investor’s monies to allow them to figure out what to do next.    This is a very misplaced approach and is guaranteed to turn investors off.  By taking the time up front and putting the effort to do your planning, develop a business plan, and being ready to execute you will impress your investors and more than likely get their attention.  In addition, by doing so, you are not expecting investors to fund you to figure things out, but putting your start-up company in the best position to receive funding from potential investors.  So, get in there and do the necessary work up front, it will serve you well when you begin talking with potential investors.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to www.carlsbadpublishing.com.

March 8, 2010 Posted by | Venture Capital | , , , , , , , , | Leave a comment