Page 161 - 6 Secrets to Startup Success

140 6 SECRETS TO STARTUP SUCCESS

is that version of a new product that allows you to learn as much as
possible about the customer with the least amount of effort and re-
sources. This approach is not about pulling a few prospective users
into a focus group. It requires that you put something up for sale, find
out who will buy it, and then rapidly iterate from that starting point.10

In contrast to this notion of rapidly iterating a minimally designed
product, Lynn Ivey’s commitment to the creation of a custom-built
adult daycare facility can be understood as a single, expensive, and
very long product iteration. Validated learning about customers would
have to wait for more than a year as the product was carefully built.
The building was an indispensable centerpiece of the business model,
but Lynn’s resources were dwindling by the time The Ivey finally
opened for business.

In the case of The Ivey and other ventures that require a large
upfront commitment of time, energy, and capital before a product can
be tested in real terms, a key issue is how to test the business hypoth-
esis early, with minimal investment. If, through early testing, a concept
proves viable, then more substantial investment can be made with
greater confidence. If the original concept does not pan out, alterna-
tive concepts can be developed. In The Ivey’s case, this might have in-
volved piloting the adult daycare service from a leased space,
acquiring early customers and learning about the market until the size
of the opportunity clearly merited investment in a new facility. With
her chosen approach, Lynn was taking on much more risk, although
she and her enthusiastic investors did not necessarily view it as such
in the booming Charlotte of 2006. Looking back, Lynn wishes she had
mitigated the risk by raising significantly more capital (at least $1 mil-
lion more) to allow for a slower, steadier customer acquisition and
learning process after the facility was in place.

SYSTEMS AND PROCESSES – Every time a product or service is deliv-
ered, the venture team has an opportunity improve its operational
approach and methodology. Core work processes often come to-
gether in ad hoc fashion as specific opportunities are chased and cap-
tured. This is healthy, in that it connects your operational design to
the marketplace and (hopefully) generates cash, but it can also lead

American Management Association • www.amanet.org