Reproducible Business Models
Why they matter to a start-up
Most start-ups need money. It is the first obsession of founders. It’s the fuel for the fire. Founders believe it will solve all their problems and ills. It won’t. We often simplify financing, we shorten the funding rounds to the name used to describe the shares, pre-seed, seed A, B, C etc. Funding rounds are often more complex than the name, often a simple letter. I prefer to think of the first round of money as the hero round. Everyone is feeding the start-up. Founders are investing their own money, sweat equity, and maybe raising from friends and family. Essentially, Eigenspace contributes to the hero round. It is the most founder friendly round and is the most helpful for early-stage progress. Hero stage start-ups squeeze the most out of cash resources. Every dollar counts, it is rain drops on a desert. “Spend but spend wisely” is a good lesson when you have more money too.
Eigenspace feeds start-ups with cash and coaching to grow quickly beyond the Hero round.
We are trying to help the transition from potential and possibility to product and practicality. Initially, everything is hard for a start-up. To keep the founding team committed and happy you need progress. Things don’t need to be perfect, but they need to be moving forward.
Measurable progress makes funding rounds reproducible. There is no one-size funding plan that fits all start-ups. How pre-seed, seed, A and B raising gets done is different. They can be different for each start-up too. The characteristic and experience of the founding team combined with Zeitgeist (market timing) are important factors in funding speed and success. Developing a clear investment thesis and knocking on the right doors also matters. But all investors expect and want to see measurable, and rapid business progress between rounds. Founders can’t “sell the wind” for long.
To digress, some believe “the best time to raise money is when someone wants to give it to you” and “the best time to sell a business is when someone wants to buy it”. Those statements are wrong. For founders, “the best time to raise money is when they are ready to scale” and “the best time to sell is when the value of the business is worth substantially more in the acquirer’s hands than in the founders”. (More in a later blog.)
The challenge of progress makes reproducible business models important foundations for a start-up. The cornerstones are:
1) Team recruitment
2) Customer Success
3) Product Development
If you begin to focus on these six areas’ early, then future financing becomes much easier.