This article was so interesting to read. There are several software companies and knowledge driven corporations who could and should apply similar type of thinking. Customers are not willing or able to invest in software simply, because the funding is tight and the business case is not automatically always so clear. That should not impact the ambition level in starting a new business, be innovative and actually design your case differently.
There after what do Airbnb, Snapchat and Uber all have in common? Please check the link below:
Uber does not own or operate any of the cabs its riders use, but it has a valuation of $17B. Pinterest does not post any of the ‘Pins’ that refer 23% of all traffic to e-commerce sites. Vine does not create any videos, yet is the fastest growing app in the world.
Some call this the sharing economy or the collaborative economy. Others refer to these businesses as marketplaces or networks. But the overarching term for all of these multisided business models is a “platform.”
Platform startups have been disrupting entire industries (like Facebook and WhatsApp with communication, Youtube with entertainment and Uber with transportation), or are innovating with the goal to disrupt and take over outdated industries (healthcare, insurance, manufacturing, finance and many more).
Design Thinking was created to be a step-by-step method to creative thinking and innovation by using a user-centered approach. Unlike analytical thinking, which is often associated with “breaking down” ideas, Design Thinking is a creative process based on the “building up” of ideas.
Design Thinking has evolved throughout the years, from Human-Centered Design focusing on customer experience, to Service Design focusing on customer journeys and touch points between a business and its customer.
This process has worked very well for traditional products and services. However, designing a business that will succeed in this new economy requires us to take Design Thinking one step further. We call this Platform Design.
Is this similar to Design Thinking? Yes, but a successful multisided business needs to build for both consumers and producers. If you fail to attract either group, your platform won’t succeed. Your platform creates value to one group of users only if the other group of users is also present. The good news is that thanks to the network effects between your different user groups, you can enjoy exponential growth if you succeed in getting both sides on board.
While institutional VC has been the traditional funding route for many start-ups, entrepreneurs are now more often turning to life sciences industry corporate venture capital (CVC) partners for financial and development support.
Please have a look to this. Summarizes some of the thoughts for your potential CVC discussions and alternatives.
By Emily Welsch, consultant, Halloran Consulting Group, November 28, 2014
STEP 1: KNOW YOUR COMPANY
The first step in this process is to conduct an internal assessment of your start-up. Please note that these criteria are subjective to the individual investor; however, every entrepreneur should be prepared to provide justifications for each.
- Significant Market Need: Does the technology apply to an indication for which there is a significant unmet need?
- Transformational vs. Incremental Technology Advantage: Does the technology demonstrate a clear differentiation from the competition and the standard of care by providing efficacy where there is none today, rather than a modification to a current treatment option?
- Patent Ownership: Does the start-up own the IP rights to the technology, or does the start-up have a clear path to strong IP?
- Strong Team: Do the start-up team members have proven capabilities in their areas of expertise? Keep in mind that a first-time entrepreneur can compensate for a lack of experience in a particular area by building a strong advisory board.
- Product Development And Commercialization Strategy: Does the start-up have a realistic product development plan? Does the start-up understand how much capital will be necessary to reach the development milestones?
- Regulatory Environment: Does the start-up understand how to navigate the regulatory environment?
STEP 2: ESTABLISH DEVELOPMENT PLAN AND SHARED PARTNERSHIP GOALS
While the industry partner may be interested in financial returns or strategic growth opportunities from equity investments in the start-up, the start-up may be looking to gain access to capital, in-house development resources, vendor connections, market validation, exposure to and expertise with international markets, and assistance with manufacturing, distribution, pricing, and/or reimbursement. Regardless of what the goals of the partnership are, there must be an established and fair balance that is agreed upon by all parties involved. Put simply, every partnership should be mutually beneficial.
Not every investor is the right fit for every start-up. Identifying the appropriate strategic partner and evaluating the potential relationship prior to engagement is a critical component in becoming partnership- ready. The start-up should begin by identifying what it is aiming to gain from the collaboration and which partners would be able to meet these needs.
- Required Resources: What resources are needed? What kind and how much support will the start-up require to reach its development goals? What are the major milestones? How will the support be used to reach each milestone? This information can be extracted from a refined product development plan.
- Capital Efficiency: How will the start-up illustrate its ability to be capital-efficient? How has the start-up proven its capital efficiency in the past?
- Time Efficiency: How has the startup proven that it is able to meet milestone deadlines on time? Proving that the start-up can stick to deadlines also helps illustrate capital efficiency because, after all, time is money.
- Identification Of Partners: Who is strategically investing in the start-up’s therapeutic area? Information on strategic interests of partners can be found on most of the CVC firm websites.
- Identification of Capabilities: Does the partner have the level and quality of resources that the start-up requires to reach its development goals?
STEP 3: PREPARE FOR ENGAGEMENT WITH INVESTORS
As the saying goes, you never get a second chance at making a good first impression. Therefore, it is crucial to fully prepare for engagement with potential investors. Preparation should include the development of an executive summary and a nonconfidential pitch deck presentation consisting of 8-12 slides that concisely covers a broad overview of investment criteria from steps 1 and 2. The intent of the presentation is not to necessarily explain every aspect of the technology, but rather to explain the value of the technology and how the technology will change the therapeutic landscape. Incorporating the start-up’s product development plan and anticipated budget into these slides can be a great tool to show the partner that the start-up not only understands what needs to be accomplished but also recognizes that the timely completion of the product development milestones builds company value and enhances the potential upside for investors.
STEP 4: GET THE INVESTOR MEETING AND BUILD YOUR BRAND
The number-one way to make contact with a strategic partner is to be introduced through a mutual connection that can vouch for the legitimacy of the startup team. While not every entrepreneur has direct connections to potential partners, there are ways to develop new relationships with these individuals and with others who can offer introductions.
Using social media, such as LinkedIn, to identify network connections to the partnership companies of interest is a great first step. Cold LinkedIn messages or emails will likely not garner a positive response, so instead of using this approach, consider asking shared connections to make introductions to the decision makers or partners of interest. The start-up can also participate in publicity activities including publications (articles, social media or blog posts, white papers, newsletters, scientific literature, and press releases), courses, webinars, angel group events, venture café events, and networking panels.
The start-up should build its brand through speaking opportunities, conferences, and networking events. There are many ways to publicize your company without providing any confidential information, and generating buzz can open the doors for partners to engage with the start-up. Partners will not seek out the start-up if they haven’t had the opportunity to get excited about what the company is doing.
STEP 5: EVALUATE THE PARTNER’S INVESTMENT STRATEGY
At this stage, it is important to assess whether or not the goals of the start-up are aligned with the corporate venture fund of interest. When both parties are working toward synergistic goals, they can easily operate in a mutually beneficial partnership. The following questions are provided to assist the start-up in assessing the appropriateness of the partner prior to final selection.
- What value will the partner add beyond the dollars?
- What are the partner’s development capabilities in the indicated therapeutic area?
- Does the partner have marketing and commercialization capabilities?
- What is the start-up’s expectation for the scope of involvement?
- If the partner syndicates its investments, does it co-invest with top-tier investors?
- What level of interaction will be expected between the partner and the portfolio company? Will the strategic partner interact between board meetings, or are they hands-off in their approach?
- What other investments has the CVC made, and does its investment strategy fit the start-up’s technology and core therapeutic area?
- At what stage does the partner invest?
STEP 6: NEGOTIATING THE PARTNERSHIP AGREEMENT
If the investor is interested in partnering with the start-up, a term sheet will be generated that outlines the goals, milestones, responsible parties, and general terms for the partnership. A lawyer may assist the start-up in negotiating these terms.
Once the terms of the partnership are established, the start-up and partner need to devise strategies to achieve these goals together. The development of these strategies requires input and action by all participants in the partnership. Often a partnership agreement may be drafted to define roles and responsibilities based on the agreed-upon goals and milestones from the term sheet.
STEP 7: MAINTAIN A WORKING PARTNERSHIP
A healthy partnership takes hard work to keep it working smoothly, frequent and effective communication, and a strong personal commitment from both parties. According to Nakada and Hafler, when it comes to functioning partnerships, it’s essential that start-ups stay focused on delivering milestones and are proactive about communicating and confronting any problems immediately.
Finding the right strategic investor can be daunting for life sciences start-ups, but successfully navigating this partnership process can be a beneficial step toward ensuring the start-up’s long-term success. Life sciences start-ups pursuing a partnership with a CVC can find a higher likelihood of success if they follow the measures laid out here, including assessing the startup’s assets and deficiencies, establishing mutual partnership goals and milestones, and maintaining expectations. Developing a start-up beyond the seed stage is challenging. Establishing strategic partnerships with the right partners benefits not only the start-up, which gains access to capital and commercialization expertise, but also the CVC and consumers by bringing transformational new products to market.
A good friend and previous colleague of mine Ari Beilingson shared some thoughts for start-up CEO´s. This list is equally valid for all management team members that are dedicated on their mission 100%, but every now and then loose their focus. I can agree with this list, hoping that it would be a simple to task to keep these in my mind and knowing that it is far from being that easy.
This is the ultimate success meter for your business. As soon as you have the Minimum Viable Product, you have to keep your customers in mind every day. When you are a small company it’s easy – just call them up and when you are a big company it is just as important.
Just remember to listen what the customers actually say. It is quite commonplace that the founders are so keen on their idea that they actually miss the feedback that customers are giving (and insist on their own idea). Those comments help you to make the changes you need to make a really fantastic product. And strike the balance between being an Apple (we pay no attention to the customer because we know better) or a small company that implements all the changes the customers wish for. Both approaches may ruin your business.
Obviously a customer base is one of the most important success enablers for any business.
“First decide who is on the bus and then decide where it is driving” (Jim Collins)… in case you wouldn’t take my word. The smaller your company is the bigger the individual hiring decision is. In a small company everything you do makes a world of a difference and in a large corporation nothing you do makes any difference. In this particular subject I would emphasize the personal characteristics with 80% weight and formal competences 20%. Good cultural fit.
It’s easier to juggle the task between people who appreciate working with each other than between formally competent people who just happen to be employed by the same company.
The big question I often think about is measuring the results: I can assess how sales or marketing guys are doing but I do not have a tool to assess the results of software developers or other disciplines that are not my own core competencies.
Be an authority on your domain
This is important for many reasons: your business is more credible in the eyes of the customers when the manager is recognized as a specialist in the domain. From marketing point of view it is also important as a lot of small company marketing is done thru social media and “earned media”. In that field you need to offer insights and material that is professionally interesting to future customers. One company doing a great job here is www.priceintelligently.com.
Look outside your company
In addition to keeping your customers in focus, also remember to look what is happening around your company. In a small company you do not have expertise in all the necessary fields. And the the business tools are developing so quickly that even own resources might not know the most useful stuff.
Internet and your fellow entrepreneurs are great resources. Learn one thing each day! I have recently found fantastic help for our business in the areas of marketing, selling, pricing and technology just by searching the internet or talking with people. Generally people appreciate a discussion about your business’ dynamics and new learnings. And they are willing to share their experience. Everybody in the team should be doing that… there is useful information all around us all the time.
Keep the costs down
Have you ever heard of a (young) company overestimating the revenues and underestimating the costs? Probably you need to work very hard for every dollar you earn but it is so very easy to spend money. This is a boring topic but nevertheless important.
The spending discipline will stay with you as the company grows and the moment when you celebrate positive cash flow is closer with smaller cost. Obviously it is not always easy to know what money to spend and what not. If you make good decisions more often that bad you are in a good shape with respect to controlling the costs.