Start small, think big
Many will have seen the film Moneyball – the Brad Pitt movie about a Major League baseball team manager who found a path to success through data and statistics – eschewing the old seat-of-the-pants approach.
The same approach is recommended for startups. Founders of startups operate in uncertainty and in many respects are predicting the future.
The single goal of a startup is to work out how to build a global sustainable business out of the entrepreneur’s vision - and typically with minimal resources.
The key is to prove your concept or hypothesis in a methodical way. In many respects, proof of concept is similar to scientific method. Build the most simple product you can. It doesn’t need many features or to be bug-free, it just needs to be viable and enable you to learn from feedback.
Then start with a small set of tests. These tests should validate your assumptions and give you real feedback and data from target customers and early adopters.
The team then needs to measure. This data needs to be serious quantitative data so you can determine whether the product or service really delivers value to the customers. Simple enthusiasm from early adopters is not, of itself, meaningful or of much use. The data collected needs to enable evaluation of the key assumptions that support your vision and strategy.
If your product or service is a web application, for example, will customers part with certain personal information online? Will customers buy the service or product online? Or will customers use the service for what it was intended for?
Once the data has been evaluated, the team needs to learn from it. The product or idea should be adapted to deliver on the customer needs.
The inventors of bubble wrap, for example, initially took their invention to market as a type of three-dimensional wallpaper. After that failed, they marketed it as an insulation product for greenhouses. They then stumbled on IBM’s need for a packaging product to protect expensive computer equipment.
In cases like this, the entire strategy changes. Depending on the feedback received, a startup founder's vision may be sustainable, or may require a major rethink.
Once you start to grow, the requirement to measure shouldn’t stop. Collect metrics about every meaningful aspect of your business, not just last month’s financial performance.
This does not mean collecting data for data’s sake, or 'analysis paralysis' - rather, data which helps you learn about your business and the global markets you operate in. This may be data about product enhancements, staff performance, sales pipeline growth, market vertical trends and user behaviour, right through to the reaction of competitors.
Make sure this culture is embedded across all aspects of your business so you can measure and importantly demonstrate growth. If you have the data and the knowhow to measure and learn from it, you can quickly adapt your business. If you don’t, it’s your business that will likely become a statistic.
Raising funding at an early stage is no different for later-stage businesses - if the data and customer validation (or a plan to obtain this) exists. A well thought through series of tests which can validate a vision and can be done on a small budget is very appealing to investors. The expensive 'build it and they will come', or the chaotic 'just do it' approaches are simply not fundable in today’s early stage market.
If you want to take your start-up to the major leagues, think Moneyball.
Andrew Duff is chairman and co-founder of Sparkbox Venture Group. www.sparkboxventures.com