I had the pleasure of hearing Len Schlesinger, President of Babson College and prolific business author speak at a function hosted by the nice folks at Gennari Aronson this week. I’ve got to remember to bring a notepad to such events because I had to resort to taking notes on my iPhone – I won’t bother you with the myriad of amusing autocorrects except to say that ‘VC’ ironically autocorrects to “vice.” Here are some of the key takeaways with some thoughts about recent discussions with clients and friends in the entrepreneurial sectors and people like me that give them a helping hand:
· Don’t be the best, be the only – A little monopoly goes a long way and is also incredibly difficult to establish. Being the only company in your sector providing a solution to a real problem means that customers will beat a path to your door. At the other end of the spectrum, I’ve had two discussions in the past week where entrepreneurs were locked in a competitive death grip. Both people seemed intent on driving their competitor closest to the cliff without themselves falling over. The problem with that approach is that you can’t make money driving your competitors over a theoretical cliff – you make money by delivering a solution to customers for a profit. I’m sure the folks at Google are laughing at the Apple’s new map fiasco, but are they making money from it? Maybe soon – we’ll see but it’s far more likely that Apple will expeditiously fix the bugs. In the venture debt business, my sense is that ‘being the only’ is the delicate balance of making a loan that everyone else thinks is crazy…without in fact being crazy. That’s how Silicon Valley Bank became the market leader in technology banking. I wonder if there is a similar opportunity in your market segment.
· Find the customer; ask what they want and give it to them – This is so mind numbingly obvious that even an NFL replacement ref could figure it out (given enough time under the replay tent). The challenge here is not to “know this is true” – the challenge is to actually do it. To make matters more complex, the customer doesn’t always know what they want – they want you to educate them. In the venture debt business, clients ask for ever-larger loan amounts …until they realize the monthly payments required. Many of those don’t even realize the monthly payments required until the end of their interest-only period when they sometimes panic and try to refinance. Steve Jobs famously gave consumers what we wanted before we even knew we wanted it.
· In unpredictable business situations, take small deliberate steps, iterate often and use the resources at hand – almost all of my clients operate in uncertain business environments. They routinely are required to provide multi-quarter forecasts of a product that no-one has ever manufactured and to a customer that has never purchased one. There should be little surprise why so many companies fall off plan so quickly. Len’s suggestion is to work with limited resources until you’ve got the model figured out. In my practice, this is most evident in the sale model. Too many companies hire a full sales staff and launch large marketing campaigns before they fully understand how the customer buys and why. Establish the sales model …then scale carefully and deliberately, making sure that each small step is taken on firm ground.
I’m sure my quick iPhone notes missed something important and valuable. You can always buy the book http://www.amazon.com/Just-Start-Action-Embrace-Uncertainty/dp/1422143619/ref=sr_1_1?s=books&ie=UTF8&qid=1348765511&sr=1-1&keywords=len+schlesinger with all proceeds going to the college. If you’ve read the book or attended one of Len’s sessions, please let me know what I missed in the comments section below.
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Eastward Capital Partners – providing $1 – 10 million venture debt, growth capital and equipment financing to venture-backed, emerging growth companies since 1994. We also provide expansion capital to non venture backed companies.
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