Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 29: goals and benchmarks and effective development and communication of them 9

Posted in startups, strategy and planning by Timothy Platt on June 5, 2017

This is my 29th posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-28.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I began Part 28 with a briefly stated, essentially checklist formatted outline of how a strategically considered and planned startup would be launched, and in a manner that could lead to stable growth and development from there:

1. Start with as clear as possible a statement of what the new business’ founder and their founding team seek to develop as a business. Couch this in general goals-oriented, mission and vision terms for what this venture would offer to its markets, and for what would competitively set it apart there.
2. Then reality check that characterization of intended overall goals, against an equally clearly stated inventory listing of the resources and assets that that founder and their team can bring to this effort, and starting with what these people personally bring to the table as far as skills and experience are concerned that would support and enable this venture, as well as any financial or other resources that they can commit and devote to it. And to complete this list, include any negatives as well (e.g. anything like non-compete agreements with previous employers, as that would impact upon one or more members of this group actually being able to perform in this new venture as intended and desired.)
3. And now bring this all into more specifically actionable terms with at least the initial planning, outline details of their business plan thinking, that would help them leverage their Point 2 resources in developing a venture towards achieving their Point 1 goals. The goal in this step is to build a foundation for iteratively, step by step fleshing out the business plan that is to be followed here, with a consistent, orderly, mission and vision statement-oriented focus,
4. And to identify where possible, any places where Plan B refinement or initial-idea replacement updates might more predictively be called for, to make this new venture as secure in its succeeding as possible; plan for flexibility and resiliency here. That means being ready to step back and make changes and corrections as needed, and with a goal of making the business plan followed, a dynamic adaptable game plan for moving forward.
5. And this (ongoing) effort enters into completing a full business plan that all involved stakeholders can comfortably sign off upon. And it also enters into early development stage planning and strategic reviews as both the expected and as the unexpected arise and have to be dealt with and resolved too.

Then after concluding, at least for now, a discussion of in-house considerations as to how this would play out, I turned to consider outside forces and factors that can significantly shape a new business and both for what it seeks to do and become, and for how it would build towards that goal. I focused there on the roles that venture capital and angel investors can play in this as they take on what can become significant equity shares in a new venture. And as part of that, I at least briefly addressed a potential source of conflict that can arise between in-house business executives and owners, and outside investors and particularly as their timing and priorities expectations and requirements might differ.

I stated at the end of Part 20 that I would a discuss wider range of in-house and insider, and outside forces and factors that can help shape how the goals of the above numbered list of business development steps would be understood and carried out. In anticipation of that, I added that I would more explicitly discuss crowd sourcing as an outside investor option and from both the crowd sourced investor side and from the side of the business invested in, as a first such example. And to repeat an orienting note that I appended to this, I observed that:

• The factors that hold importance here are those that directly and specifically influence and shape that business’s capacity to create value. That is where these factors impact upon and influence and even shape the business at its most fundamental level, and outward from there.

Angel investors, and venture capital investors in particular: more traditional sources of outside investment besides supportive funding from immediate family and friends, involves significant levels of funding that comes from a small number of sources and certainly for any given venture that is invested in.

• A new business venture that has an arguably exciting mission and vision to offer might capture the interest and funding of a small group of angel investors but even there, that number is going to be limited and very much so, in all but the most exceptional cases.
• A venture capitalist, or more likely a venture capital company that is considering investing in a later stage startup or early growth business is in most cases going to want to be their exclusive source of outside investment funds. Their due diligence analyses would argue against their putting themselves in a position where they might face conflicting claims from other investors, to ownership rights to a share of the overall value of the businesses that they invest in, that would match and cover the investments that they have made there. So here, a limited number of these investors generally means just one and even with second round venture capital investment explicitly considered where the business that is being invested in has already proven itself.

Crowd sourcing reverses all of this. Investment funding from this type of source means small and even minuscule loans of invested funds from what can be hundreds, thousands, tens of thousands or more individual investors.

• Individually, none of them do or can claim hold to any significant share of the equity that a new business they invest in might hold.
• None of them individually would have much if any say in how the business is run and either operationally or strategically.
• Like angel investors, crowd source investors tend to be drawn to what they see as positive and affirming missions and visions as offered by the business investment opportunities that they pursue.
• And at least collectively, like venture capital investors, a community of involved crowd sourced investors can bring together very large pools of investment funds. Individually they might only modestly invest but when thousands and more of them all invest small, the overall result can become very large.

This process has all become a lot more streamlined in recent years, with the advent of crowdfunding platforms such as Kickstarter, RocketHub, GoFundMe and I add quite a few dozen more – and with that just considering funding platforms that have shown significant levels of actual activity and with real investment ventures and real investors. These platforms provide a number of services and both to the crowdfunding community and to ventures that seek such support. One of them, that holds value from the fund provider perspective can be found in how they vet and validate legitimate new ventures that meet their standards as legitimate places to invest money. And one that holds value from the perspective of businesses and organizations that would seek out this funding, is marketing and increased visibility, and through channels that crowd sourced investors would look to when selecting ventures to invest in. These organizations serve as middlemen in the crowd sourced funding arena, but ultimately the people who invest in the businesses they highlight, invest with those new ventures and as small investment level individuals. So the basic points just noted about crowdfunding still apply.

From a new business perspective, crowd funding provides a great deal more than just readily available liquidity, as important as that can be. It creates a marketing presence and market buzz, with all of the additional viral marketing reach that connecting positively with an online and social media-connected crowd can bring. And it does this with minimal loss of control over business decisions as they are prioritized and made.

• Decision making pressures from the funding crowd that has been reached out to, is primarily a matter of meeting a due diligence requirement of actually striving to reach the mission and vision statement goals that their crowd funding campaigns were built around, where an apparent good faith effort would meet the requirements and expectations of most of these investors.
• If a desired goal that was being funded towards were easy, it is unlikely that many would see crowd sourced funding in support of it as being necessary; it is the difficult-appearing challenges that get this type of funding, where real overall success can never simply be taken for granted.

I am going to continue and conclude my discussion of crowd sourced funding in the next installment to this series, at least for the issues that would be addressed here. And then I will turn to consider a more in-house set of issues and factors that can rise to real importance here: exit strategies and what the owners of a new venture seek to build it into, and from when it really begins to bring in consistent profits and moving forward from then. And as a part of that, I will explicitly discuss the issues of growth companies and businesses that really pursue that vision, and profit center companies and businesses that really pursue that vision.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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