Hello SOTGC community,
Welcome to Part 3 of my series The 6 Stages Of A Woman’s E-Ship Journey. Today Patti Fletcher and I discuss Stage 3: Startup.
Stage 1: Opportunity Discovery (I’ve got a great idea!)
Stage 2: Commercialization (I’m validating and pivoting my idea)
Stage 3: Startup (my idea is now ready for Startup)
Stage 4: Growth (startup going well. I’m ready to grow my business)
Stage 5: Exit (time to Exit this business and start my next big thing)
Stage 6: Leadership (what’s my next big thing?
Heather Boggini: Okay Patti, by now our readers understand the basics of Stage 1: Opportunity Discovery, and Stage 2: Commercialization. And finally it’s time to talk “startup,” which to me sounds exciting and potentially profitable! Am I way off? Start us off with a definition of Stage 3: Startup.
Patti Fletcher: The start-up phase is primarily focused on getting your business off the ground. Everything you do in this phase is focused on forming and funding your business for short- and long-term success.
“This is the stage where most founding teams work the longest and the hardest. It tends to be a 24/7 effort.”
The founding team will be forming a board of advisors who can help open doors to potential clients, partners, and funders as well as contribute to the team’s product roadmap strategy. The founding team will be expanded based on product and market roadmap needs as well as sales planning and execution requirements needed to meet business plan projections.
For high-growth companies, you will most likely need external funding to realize business plan goals. The founding team, especially the CEO, is in full sales mode. The founding team will be spending a lot of time pitching to Angel Investors or Venture Capital firms depending on how much money they need to raise and what stage of startup they are in.
Boggini: When I think “startup” I automatically think high tech and Silicon Valley. Is that an accurate assumption these days?
Fletcher: A lot of people think that startup is synonymous with high tech and the Silicon Valley. That’s just not the case. A startup is a high-growth venture, but high-growth ventures are not limited by industry or by geographic location.
A startup is a company with a fabulous offering that a lot of people want, and that company has the ability to deliver that offering on a very large scale. It’s true that startups tend to be market disrupters because they do things in such a different way (for example, Amazon) or deliver solutions that no one else thought of and that soon become what everyone needs and can’t live without (Starbucks).
Boggini: What are the milestones to be achieved at this stage? And what are common mistakes an entrepreneur should watch out for?
Fletcher: The milestones in this stage include:
- raise the money needed to build, market and sell products
- hire staff
- form the culture of the business
- form the corporate board
- create the product roadmap
- customer acquisition.
There are so many mistakes that entrepreneurs make in this stage. Particularly women, and I will tell you why. If you are starting a high-growth venture, you will need a lot of money to get up and running. Women founders account for less than 10 percent of venture funding! That’s awful.
When I question my VC friends about that 10 percent, I hear anything from “I never see women apply” to “unlike men we reject, women who we reject never come back.” I also hear that women do not pitch for enough money, only what they need right now.
Boggini: What can female founders do to improve their chances of getting funded, or, at least, have positive and beneficial interactions with potential investors?
Fletcher: I would like female founders to know up front that they will face a lot of rejection during fundraising. Take the feedback you hear and perfect your pitch. And, keep in touch with VCs, let them know of your progress or what you have changed based on their feedback.
Come prepared and know your numbers! Too many founders think their ideas are what sells. Your cool products may be awesome, but investors need to be sold on you and your ability to make money for them.
And, look at the long view when going for money. Don’t be afraid of asking for a lot, as long as you can defend how you will spend it and why. Finally, put together a solid board and a powerful funding team. Remember, when it comes to these early stage stakeholders, it is just as important as who they know as it is what they know.
Boggini: Whenever you talk about the entrepreneur’s journey, you stress that the journey a female entrepreneur takes isn’t always linear. Talk about what comes after startup. Is she automatically moving onto Stage 4: Growth.
Fletcher: Once the founding team has the funding and the team needed to grow the business, then, yes, typically the growth stage follows. What does happen, though, is that founders may experience a bit of going backwards or dipping into some of the start-up milestones while they are in either Stage 2 (Commercialization) or Stage 4.
For example, while fundraising or building a team, a board, or developing the GTM plan, changes to the product or target customer may result. The changes may require new commercialization insights. It doesn’t mean that the founding team has to go backwards, it just means that some rework or new work has to be done. Chances are they are conducting that research while still progressing through the start-up milestones.
For businesses already in growth stages, they may find that new growth opportunities require additional funding or new board members, thereby requiring them to revisit several Stage 3 steps while still progressing through Stage 4.
Business leadership is a fluid experience and being an entrepreneur leader requires extreme flexibility and willingness to move in and out of stages based on business requirements. For women, this is particularly true as many women find themselves leading a high-growth business in stage 4 because women do tend to think smaller, probably because we are far more pragmatic.
“If you are Startup headed to Growth, remember that a bigger vision requires more money, different board, different team perhaps. Be prepared – not surprised.”
Boggini: Patti, is there anything else we should know about Stage 3 that I have not asked?
Fletcher: Yes. It’s really easy to go into the start-up phase with unrealistic expectations. Don’t. If you need money, you have options. You can go to friends and family. You can take a bank loan. A convertible loan. You can self-fund. You can grow your business based on revenue. These are all good options, but if you need to build an infrastructure requiring expensive talent or you need to build an inventory, you may want to think about investors.
The stories of folks like the Google founders, Mark Zuckerburg, or even Unreal Brands candy where VCs funding and name brand board members flocked seemingly overnight ‑ those are the extreme exceptions, not the rule. It takes months to raise money for your business.
And, it’s not just about landing investors. It’s a personal decision as much as a professional. There needs to be a personality fit, a portfolio fit, a belief in you and your belief that the expertise and access you will get from an investor is just as valuable as their money.
Finally, don’t forget to protect yourself. Make sure you negotiate the right terms for you and for your team. Make sure you think about the long-term implications of your term sheet. Do not agree to something that sells you short or that may give future investors an indication that you do not know how to negotiate with the long-term in mind.
Boggini: Thank you Patti and next time we’ll talk about Stage 4: Growth.
You ready to get going on your start up plan? Please Tweet this post if it inspired you to get moving toward your dream business. Reach out to Heather Boggini at @hsboggini, to Patti Fletcher at @pkfletcher and to their blogs at PSDNetwork, LLC.
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