Startup Says What?
Startup says what? Here’s an entrepreneur guest blog on common startup myths and how you can learn from them…
They are the little white lies entrepreneur like to tell partners, investors, potential employees and their spouses. It’s like a code. Every sentence can be translated from startup-speak to the English equivalent. I know I’m in for a long conversation, meeting or pitch when I hear any of these…
Startup Says: ”We are a pre-revenue startup with a great team that has a proven track record. We’re getting early traction; our product has viral potential…just as soon as we get out of stealth mode.”
Translation: We’re giving our innovative product away to our friends and family, my mother-in-law really loves the dancing cats but nobody else knows we exist.
Startups ought to leave this out of their elevator speech or product pitch opening.
Startups Says: ”We’re looking for $100,000 at a pre-money valuation of $1,000,000.”
Translation: The actual valuation is closer to zero. We all know that. I’m totally open to negotiation.
Every startup picks a multiple of a million dollars for preliminary valuation because it makes the math so much easier for angel investors to compute. Let’s face it; startups without performance metrics are impossible to evaluate, any attempt to determine value is fruitless.
So what are the common metrics? Well, it could be something like: customer acquisition over time, average number of minutes spent by user on site per visit, frequency of returning user, the number of transactions (pick one…) performed per user per day. These metrics can be turned into revenue projections, revenue into return and then return to valuation.
Startups Says: ”We’re a disruptive force…”
Translation: I heard someone at Y-Combinator say this about thirty times. Quickly check for a copy of The Innovator’s Dilemma in their briefcase but only after you’ve asked for their definition of disruption. Giving the product away isn’t disruptive, working 24/7 only disrupts their social life, and ‘customerlessness’ is certainly not disruptive. It’s just a trendy way of getting attention.
There are plenty blogs that have provided exhaustive definitions of what it means to be disruptive and the definitions often depend upon whether it’s a product or service. I’m not going to get into that here.
Startups Says: ”We started up several years ago but after a lot of feedback we’ve pivoted…”
Translation: we’ve assembled a team of crack engineers or developers that were building a product that nobody really wanted. We’ve fired our product management team and are starting over.
Now don’t get me wrong, there’s nothing wrong with mid-course changes of direction…as long as your pivoting with your customer base, not away from them. Of course that assumes you have customers in the first place. It’s always best to talk about pivoting after it’s worked not in conversation with an investor or partner.
Startups Says: ”We’re going to change the world…”
Translation: “I’ve recently returned from a Tony Robbins seminar and… I really love you man”
It is essential that entrepreneurial startups believe in their product or service; they have no other choice. I can’t imagine spending 3000 plus hours a year building a company that I didn’t believe in. So the startup gets points for enthusiasm but loses all credibility for the delusion. Put that sentence anywhere on your slide deck and you’ve lost me. Feel free to talk about changing the world once you’ve actually started changing the world.
Startup Says: ”The product is … a breakthrough, patented, innovative, yada-yada-yada”
Translation: “Lipstick is on the pig get ready to watch us make bacon”
When I hear these adjectives I’m prepared for a crappy demo or an unfinished product. My advice is to dispense with the adjectives. I want to know what the product does, who the target customer is and then I want a demo. In almost every case I’ll be able to detect the secret sauce if it’s there and I’ll be more excited because it was my discovery. After the demo reiterate the opportunity and then just shut up. The questions will come.
Startup Says: ”We have no competitors…”
I never really know what to say when I hear this. The startup is either incapable of doing the research OR they’re pitching a product that has no market. Competitors indicate that the market is prepared for the product or service; that’s a good thing. No competitors: bad sign. Go find some competitors…
OR be prepared to pivot because you can’t disrupt a non-existent market!
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