Startup Founders Who Can Execute Always Win

As an investor, you need to know that the founder has a plan that moves her from talking about her idea to executing her idea. It can't be just any old plan, which is where a lot of startups fall flat–the plan is often "develop a thing people want and make it available." The problem with the "if you build it, they will come" mentality is that it only works in fantasy sports movies...and in a few rare cases with actual products. As an angel investor, you can't count on your investment choice being one of those rare cases.

Steve Jobs.jpg

Steve Jobs is quoted as saying, “You can’t just ask customers what they want and then try to give that to them.”  You’ve got to let customers that they need and want your product before they know it themselves.  Startups need more than a plan for the product – they need marketing and branding plans; the actions laid out by those plans must have potential for engaging customers and building loyalty.

Evaluating the founder's plans involves strategy and experience, and it's not enough to be able to recognize that a product idea is solid. It goes back to our poker metaphor from chapter two. You might know enough about poker to recognize a royal flush when it's dealt to you, but do you have the skill and experience to play the hand for maximum profit? 

One of the benefits of investing through Angel Kings is that we not only help you recognize when a strong hand is being dealt, but we also help you play the hand for maximum potential. We use both a checklist and a points approach when evaluating a founder's execution plan, coupling that evaluation with the considerations detailed in other chapters of this book

TWO APPROACHES TO EXECUTION

When executing the creation and marketing of a product, most successful entrepreneurs make use of either a Lean Startup or a Novel Startup.

A “Lean Startup” begins with a minimum viable product (“MVP”. The product is simple, often inexpensive or involving a low capital requirement at the start, and can be tested on consumers. Consumer testing–often in the form of a beta distribution–lets startups create multiple reiterations of a product until it meets the needs of the market, at which point distribution usually takes off.

When executing the creation and marketing of a product, most successful entrepreneurs make use of either a Lean Startup or a Novel Startup.

what-is-mvp.png

A “Lean Startup” begins with a minimum viable product (“MVP”). The product is simple, often inexpensive or involving a low capital requirement at the start, and can be tested on consumers. Consumer testing–often in the form of a beta distribution–lets startups create multiple reiterations of a product until it meets the needs of the market, at which point distribution usually takes off.

Pinterest is a prime example of a Lean Startup.  First, the product itself is virtual, which is less expensive to distribute than a tangible good.

Pinterest.jpg

Second, Pinterest made use of beta testers for free research and development to perfect its product. The site launched in March 2010 as a closed beta, limiting users to facilitate a tight communication process that allowed for efficient troubleshooting and product tweaking. Even after the closed beta, Pinterest operated as an open beta product for some time, which meant users could invite others to the platform but were still reporting bugs as necessary to product developers.

A Novel Startup is one that involves a very distinct or new product–something that reinvents the wheel. The product may meet needs already being met, but it does it through a new method. In some cases, a startup may fall into both categories–Pinterest, while a Lean Startup, was also a Novel Startup.

Another prototypical Novel Startup was Peter Thiel's vision for what became PayPal.  In fact, we highly recommend the book “Zero to One,” in which Thiel outlines his vision for homerun startups.  The product began as a fraud detection system, as fraud transactions became a bigger concern for consumers. The novel idea–that online and other transactions could be safe, efficient, and easy–resulted in the PayPal money transfer service of today. Money transfer needs were already being met with services such as Western Union, but no one was meeting them in the convenient, mobile manner that PayPal manages.

FIVE CONSIDERATIONS FOR STARTUP EXECUTION

At Angel Kings, we look at five major considerations when evaluating a founder's execution plan or the potential for a product to be executed. In this chapter, we'll walk you through each of these considerations by looking at Pinterest and Apple as main examples.

  1. Does the plan encourage or make use of user execution?
  2. Does the plan use product or marketing to create conversation?
  3. Is there a potential for memorable marketing?
  4. How likely is the brand to spark its own culture?
  5. Does the product, service, or brand meet a psychological need?

At Angel Kings, we’ll help you find the next billion-dollar startups so you can be a part of the future and get an enormous return by angel investing.