Marketing Plan for Your Startup.
Marketing and Sales Section of the typical business plan.
The Marketing and Sales Section is the "guts" of a business plan. Generally divided into three parts.
• Market Analysis, which presents a discussion of the Market Needs, Market Trends and Market Growth Projections and the Distribution and Buying Patterns for each of your business' core products and services.
• Industry Analysis, which includes a delineation of Major Competitors (with a discussion of their strategies) and Important Industry Participants and the roles that they play within the sector.
It starts with a Value Proposition Statement that describes, both, what value you deliver to the marketplace and the competitive edge you garner by doing what you do the way that you do it.
Other major parts of the Marketing Strategy include the tactics and budgeted activities required to gain market share. It contains:
• Positioning Statements, which describe your offerings and outline their key selling points.
• Pricing Strategy, which outlines how you will price your offerings and discusses the way your model was designed, including any service, discount or volume pricing assumptions that underpin it.
• Promotion Strategy, which is typically conferred in phases to match your offering's evolution through its maturity curve, this part of the Marketing Strategy offers your approach to attracting and retaining customers.
• Distribution and Delivery Strategy, which defines your tactics for providing your offerings to your target customers.
• Marketing Programs, which encapsulates the work described above and packages it into distinct initiatives that must be staffed, funded and executed over time in order to realize the outcomes described in the business plan.
• Strategic Partners, which outlines a business relationships that you have which can be leveraged to grow the business.
• Sales Forecast, which provides an estimate of sales by offering over time while charting the critical success factors necessary for achieving the sales projected.
• Sales Plan, which translates the Sales Forecast into specific actions to be taken by you and your Strategic Partners in order to reach the targeted sales goals.
As you can see, developing the Marketing and Sales Section of your business plan can be a challenging endeavor. However, finding lenders and investors for your start-up will be even more grueling than this, if you don't do a good job in presenting your marketing and sales approach. Plus, as mentioned earlier in the series, driving through the issues outlined above will only make you and your business stronger in the long run. So, spend the time needed to do it justice.
When starting a technology company, understanding the needs of the market can be the difference between success and failure. The best way to understand whether you have a viable business idea is through market research.
When it comes to market research for your product, most people trust their instinct rather the data. This happens because you are excited about the product. Under stress and excitement, the hormones will force you to trust the instinct rather than the logic. Gut feelings work sometimes but can go terribly wrong. This is one of the reasons why most startups won’t make it to their second anniversary.
The purpose of market research is to validate an assumption. The assumption can be anything from product development to the sales and marketing strategy. You have to mine and analyze market data to reach a conclusion.
What are the important questions you can get answered from the web data?
1. Who are your competitors in the market?
– Knowing who your competitors are, and what they are doing, can help you to make products stand out.
2. Is there a clearly identifiable market for your product?
– No company is big enough to satisfy the needs of an entire market. The point is to finding your niche and capitalizing on the available opportunity by positioning your product in alignment with customer needs.
3. What are the business models of your competitors?
– You need a viable business model, and learning about your competitors business model can give you insights on sales and marketing strategies. You can use this data to perform a SWOT analysis and fine tune your strategy.
4. What are the product distribution channels of your competitors?
– Many entrepreneurs who build great products don’t have a good distribution strategy. Having a good knowledge of your competitor's product distribution strategies can help you develop your own distribution strategy.
5. With whom you can collaborate?
– A good partnership with companies that integrates with your product strategy can take your business to the next level.
6. How much funding your competitors have raised till date?
– This can be an indicator of growth in the niche and also a confidence booster for you.
7. Which VC’s are actively investing in the specific niche?
- With the data, you can get a good idea of which VC firms are actively investing in the specific market. Instead of pitching a lot of investors, you can build a targeted list of and pitch them. You will save a lot of time doing so.
There are a lot of people who wants to research on companies and startups. One thing many of them don’t have is the access to required data. Without enough data, the conclusions of a research won’t be authentic and reliable. This data should be accurate and up to date.
How to get Data for your research?
Some of the most reliable sources for obtaining the data are from Crunchbase, Angel.co, and other business directories. Some sites have API’s, but many of them do not have one. We can get a 360-degree view of the companies if we can use API’s of Crunchbase, Angel.co and mine and correlate data from other publicly available sources. The following data attributes are very normally used.
• Company Name
• Date founded
• Funding received
• Contact info
You can get all the data in a neat spreadsheet. The data should be filtered and concise so that you have only relevant information. Analysis of this data should be able to answer your questions to help you validate the assumptions.
How to segment the Data?
You can use any common spreadsheet software to segment the required data.
This deserves a separate post. It can be nerve racking but ultimately prepares your for future pitches and gives you some control over the weekend (if you attract enough votes).
At some events half the room will pitch. The most business viable proposals are often forgotten. Designers and developers are keen to work on interesting and creative projects. Pitch something that will gain the interest of a team, rather than funding. Concepts that will utilise popular technology are always popular.
i) First, brainstorm your ideas down on a piece a paper by considering the following:
– Problems – What things do I see everyday that I want to fix?
– Pain Points – What really annoys me? What is totally inefficient?
– Random – Whatever else is on your mind?
– Customer – Who is your target market?
– USP – What is your unique selling point/proposition (USP)?
An example of a simple template – Four boxes for each idea (Problem, Segment, Pros, Cons).
ii) Second, pick your favourites and attempt to apply a solution. Think about how the prototype will look and what elements it will incorporate:
– Web-based application,
– Mobile based application,
– Social networking site,
– Location based,
– Game based.
You will dive deeper into the product once you form a team.
iii) Thirdly, combine these thoughts and pick the best one or two.
Discuss these ideas with your friends, family and/or colleagues.
Now you have your idea(s), it’s time to build the pitch. Commonly you only have a minute to sell yourself and idea. Split your 60 seconds into these sections:
– Who are you? (5-10s)
– What’s the problem? (10-15s)
– What’s the proposed solution? (10-15s)
– Who are you looking for? (5-10s)
Remember to smile and be enthusiastic. Keep cool and don’t forget yours in a friendly and open forum. You are not the only one a little nervous. Standing out will help people remember you. Silly hats or body paint may help.
At the end of all the pitches, you should be given an opportunity to summarize the pitch on a piece of paper. Make sure it stands out and simply explains the main elements of your idea. Finally, the audience will vote.
You may need to hustle people to get their votes or combine with others to gain enough votes.
Don’t get upset if you don’t get enough votes. Join a team where you can show off your skills and learn new things. After all, the weekend is all about learning and networking. The idea is not as important as the process.
How to Write a Business Plan?
Why is a Business Plan important?
There are many great reasons why it is worth your time creating a Business Plan – even if you’re not quite ready to apply for a Start Up Loan. Here are just seven:
A Business Plan:
1. Provides a structured way of organising your thoughts and clarifying your idea.
Basic set of rules to be followed by everyone to write a business plan:
Keep it short:
2. Helps you set out your goals and spot any potential problems in achieving these goals.
3. Gives you a clear strategy to follow when things get busy.
4. Is often essential for securing external finance for your business (and is required if you’re applying for a StartUp Loan).
5. Allows you to measure your progress as you go along.
6. Ensures all of your team are working towards the same vision.
7. Helps you plan for the future.
Business plans should be short and concise. The reasoning for that is twofold: 1) You want your business plan to be read and 2) your business plan should be accessible, something you continue to use and refine over time.
Know your audience:
Your plan should be written in a language that your audience will understand. Example : A tech startup can be explained easily to a technical background investor. Accommodate your investors, and keep explanations of your product simple and direct, using terms that everyone can understand.
Don’t be intimidated:
The vast majority of business owners and entrepreneurs aren’t business experts. Just like you, they’re learning as they go and don’t have degrees in business. Writing a business plan may seem like a difficult hurdle, but it doesn’t have to be. If you know your business and are passionate about it, writing a business plan and then leveraging your plan for growth will be easy.
Your executive summary is a snapshot of your business plan as a whole and touches on your company profile and goals.
Your company description provides information on what you do, what differentiates your business from others, and the markets your business serves.
Before launching your business, it is essential for you to research your business industry, market and competitors.
4.Organization & Management
Every business is structured differently. Find out the best organization and management structure for your business.
5.Service or Product Line
What do you sell? How does it benefit your customers? What is the product lifecycle? Get tips on how to tell the story about your product or service.
6.Marketing & Sales
How do you plan to market your business? What is your sales strategy? Read more about how to include this information in your plan.
If you are seeking funding for your business, find out about the necessary information you should include in your plan.
If you need funding, providing financial projections to back up your request is critical. Find out what information you need to include in your financial projections for your small business.
An appendix is optional, but a useful place to include information such as resumes, permits and leases. Find additional information you should include in your appendix.
Product or Service Description
The products or services section of your business plan should clearly describe what products and/or services you're selling with emphasis on the value you're providing to your customers or clients.
What Does a Products or Services Section in a Business Plan Include?
The products or services section should include an in-depth look at all of the elements related to the products or services you are selling.
Tips for Writing the Products or Services Section
This section can be broken down into the following parts:
• Description of the products or services
• Brief comparison to similar products or services in the market
• List of your price points
• Explanation of how product orders will be fulfilled
• Overview of any special software, equipment, supplies or technology that is required to provide your product or service
• Outline of future products or services anticipated
Keep these tips in mind as you write your products or services section so you can make it an effective part of your business plan.
• Focus on the Customer - The purpose of the products or services section of your business plan is to clearly express the benefits you're providing to your customers or clients. All of the background you provide should focus on that goal. Think in terms of answering, "Why does my ideal client want this? How will my product or service make his/her life better, easier or more profitable?"
• Get to the Point - What is the primary function of your products or services? Outline the need you are fulfilling, the problem you are solving and the overall purpose of the product or service.
• Keep It Simple - You're the expert in the industry, so you may overlook some fundamental elements when describing your products and services because it's so common to you. However, the basics may not be as clear to those reading your business plan. Assume the reader has little to no understanding of your industry and product or service.
• Show Your Uniqueness - While describing similar products and services that are already in existence, take some time in your description to express how your product or service is different, better and unique.
• Include the Fine Print - While the bulk of your products or services section should focus on the end result product or service, you should also include information about your pricing and how you arrived at that price point. And be sure to include details about how the product will be sold (i.e. retail, online, etc.).
How to make competitor analysis for your idea or startup?
Before going further choose any of the below options:
Why is a Business Plan important?Any business is started with two major objectives in mind –
[A] To become a leader in some domain and acquire small business models.
[B] To become a competitor in some vertical and get acquired by some big player.
There are few documents that get the attention of product planners and marketers the way that a competitive analysis does. A good competitive analysis is a scouting report of the actual market terrain that your company must navigate in order to be successful. And there is no person better equipped to write one than a market-savvy technical writer.
To write a good competitive analysis, you must:
• Be objective.
A competitive analysis covers five key topics:
• Conduct fearless and thorough research.
• Write well.
• Your company's competitors.
A List of Competitors:
• Competitor product summaries.
• Competitor strengths and weaknesses.
• The strategies used by each competitor to achieve their objectives.
• The market outlook.
The analysis begins with a list of your company's competitors. Most of the time, such a list is comprised of what your company considers to be its chief competitors. However, there may be other companies that indirectly compete with yours, ones that offer products or services that are aiming for the same customer capital.
Competitor Product Summary:
Analyze the competition's products and services in terms of features, value, and targets. How do your competitor's sell their wares? How do they market them? Customer satisfaction surveys conducted by the trade press can help you tremendously. How do customers see your competition? Ask your sales force for information -- they can be your best source of information about your competitor's customers.
Competitor Strengths and Weaknesses:
As you put together the list of competitor strengths and weaknesses, be objective. You'll do your company no good if you allow bias toward your own products and services to cloud your judgment. Try to see the competition's products as though you were the competitor. What makes their products so great? If they are growing rapidly, what is it about their product or service that's promoting that growth?
Competitor Strategies and Objectives:
You can find this information in a variety of ways. Certainly there are numerous Internet resources you can use -- the competitor's Web site is always a good start. The trade press is an invaluable resource, but don't do all your research through the Internet. Make some phone calls, talk to the journalists and consultants who are active in the industry. These people are a lot easier to find than you'd think, and they are often happy to share facts and opinions with you.
Observe how your competitors market themselves through press releases and advertising. Quarterly and annual reports reveal a great deal of information, too. But more than likely you'll have to do quite a lot of footwork to nail your competitors down.
Interviews of journalists and consultants can be valuable. You will have to go to many different sources to get a complete picture. What about your competitors' customers? Good sales people will know who they are and can help you get this sort of information. It takes practice and a little shrewdness on your part to piece together a complete picture of strategies and objectives. Focus on the facts, be persistent, and trust your intuition to help you.
What is the market for your company's product like now? Is it growing? If so, then there are likely quite a few customers left to go around. If on the other hand the market is flat, then the competition for customers is likely to be fierce. Your company will find itself scrambling to win market share. Is the market splintering -- is it breaking up into niches?
The outlook portion of your analysis may seem like prognostication, but it's really a measure of trends. By the time you've done most of your research, you'll have enough information to determine what the outlook really is.
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A/B testing, split testing or bucket testing is a method of marketing testing by which a baseline control sample is compared to a variety of single-variable test samples in order to improve response or conversion rates. (Source: Wikipedia)
At its core, A/B testing is exactly what it sounds like: you have two versions of an element (A and B) and a metric that defines success. (Source: Smashing Magazine)
“Agile software development is a group of software development methods based on iterative and incremental development, where requirements and solutions evolve through collaboration between self-organizing, cross-functional teams. It promotes adaptive planning, evolutionary development and delivery, a time-boxed iterative approach, and encourages rapid and flexible response to change. It is a conceptual framework that promotes foreseen interactions throughout the development cycle. The Agile Manifesto introduced the term in 2001.” (Source: Wikipedia)
Not to be confused with the adjective:
“Able to move quickly and easily: “as agile as a monkey”; “an agile mind”.” (Source: Google Define)
There is plenty of debate and argument about the misuse of the term ‘agile’. It should only be used in it’s proper context to avoid argument.
“An angel is a wealthy individual willing to invest in a company at its earlier stages in exchange for an ownership stake, often in the form of preferred stock or convertible debt. Angels are considered one of the oldest sources of capital for start-up entrepreneurs.” (Source: WSJ)
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“The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it’s a measure of negative cash flow.” (Source: Investopedia)
When your burn rate increases or revenue falls it is typically the time to make decisions on expenses (eg reduce staff).
“Bootstrapping or booting refers to a group of metaphors that share a common meaning: a self-sustaining process that proceeds without external help.” (Source: Wikipedia)
The meaning will vary depending on context. Bootstrapping in computing and software development, varies slightly to bootstrapping in business. The commonality is the characteristics of ‘self-sustainability’ and creating something that can be ‘grown’.
“Bootstrapping involves launching a business on a low budget. Practically this means that you’ll outsource (most likely off-shore) your design and development, you‚’ll rent your servers, you won‚’t have an office and you’ll have no salary. Prior to launch, the only expensive professional services which you’ll buy will be your legal advice and accountancy services. Everything else, you’ll have to pick up yourself and learn as you go along.” (Source: RWW)
An Example of 3 Stages of a Bootstrap (Source: Ash Maurya):
1. Ideation (Demo)
2. Valley of Death (Sell)
3. Growth (Build)
Note that a bootstrap and lean startup have differences and bootstrapping does not mean spending any money.
“Bootstrapping and Lean Startups are quite complementary. Both cover techniques for building low-burn startups by eliminating waste through the maximization of existing resources first before expending effort on the acquisition of new or external resources. While bootstrapping provides a strategic roadmap for achieving sustainability through customer funding (i.e. charging customers), lean startups provide a more tactical approach to achieving those goals through validated learning.” (Source: Ash Maurya)
“A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts. It has many functions, from securing external funding to measuring success within your business.” (Source: Business Link)
A business plan is a static operational document to how your business will run.
“The Business Model Canvas is a strategic management template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs.” (Source: Wikipedia)
A business model is a dynamic document that describes how your company creates, delivers and captures value.
The 9 Business Model Canvas Building Blocks (Source: Business Model Generation):
1. Customer Segments
2. Value Propositions
4. Customer Relationships
5. Revenue Streams
6. Key Resources
7. Key Activities
8. Key Partnerships
9. Cost Structure
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The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. (Source: Oxford Dictionaries)
Kickstarter is probably the most well known and largest funding platform for creative projects.
Customer Development Model
“The ‘traditional’ way to approaching business is the Product Development Model. It starts with a product idea followed by months of building to deliver it to the public.” (Source: Find The Tech Guy)
However, the Customer Development Model begins by talking to prospective customers and developing something they are interested in purchasing/using. These concepts are promoted strongly by Steve Blank and Eric Ries who encourage startups to get early and frequent customer feedback before developing their products too far (in the wrong direction).
The four steps to the model (Source: Find The Tech Guy):
1. Customer Discovery
2. Customer Validation
3. Customer Creation
4. Company Building
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“An innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.” (Source: Wikipedia)
The term ‘disruptive technologies’ was coined by Clayton M. Christensen and articulated in his book The Innovator’s Dilemma.
The term ‘disruption’ is now often used by startups to describe any product or idea that may change existing markets or products (planned or unplanned). However to be used correctly it should link to Christensen’s original theory. The confusion is best explained here.
An example is the disruption Wikipedia caused to the Encyclopedia market.
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An early adopter, lighthouse customer or trendsetter is a person who embraces a given company, product, or technology before most other people do. Early adopters form an early element of the technology adoption life cycle, a model that portrays the spread of new ideas and technology. (Source: Wikipedia)
The other categories include:
“An elevator pitch is a concise, carefully planned, and well-practiced description about your company that your mother should be able to understand in the time it would take to ride up an elevator.” (Source: Business Know How)
Being able to pitch your idea is crucial for entrepreneurs and valuable in any formal or informal networking situation. It allows you to quickly describe your concept to anyone in a short period of time, including potential partners or investors.
“An entrepreneur is an individual who accepts financial risks and undertakes new financial ventures. The word derives from the French “entre” (to enter) and “prendre” (to take), and in a general sense applies to any person starting a new project or trying a new opportunity.” (Source: wiseGEEK)
“In finance, equity is ownership in any asset after all debts associated with that asset are paid off.” (Source: Investopedia)
Equity = Assets minus Liabilities
In terms of startup, it is commonly used to describe a business giving up a percentage of ownership in exchange for cash. An equity investor is then entitled to share in any future profits and/or sale of business assets (after debts are paid off).
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Freemium is a business model by which a product or service (typically a digital offering) is provided free of charge, but a premium is charged for advanced features, functionality, or virtual goods. The word “freemium” is a portmanteau combining the two aspects of the business model: “free” and “premium”. (Source: Freebase)
Funding or financing is when a business needs an external source of finance (or borrowings) where the capital needs of the business exceed its own available resources and those of any shareholders. (Source:Business Dictionary)
Well known venture capitalist (and co-founder of Ycombinator) Paul Graham outlines startup funding sources into the following categories:
Friends and Family
Seed Funding Firms
Venture Capital Funds
Other – Includes grants
(Source: Paul Graham)
The amount of money you achieve from sources can vary, but may follow the below guidelines:
Angel Funding (usually equity) – £25,000 to £500,000
Commercial Lending – various
Venture Funding (usually loan, convertible loans or equity) – £500,000 to £5,000,000
Crowd Funding (usually direct investment) – £5,000 to £1,000,000
(Source: London Funding Conference)
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“Gamification involves applying game design thinking to non-game applications to make them more fun and engaging. Gamification can potentially be applied to any industry and almost anything to create fun and engaging experiences, converting users into players.” Some startups utilise gamification to incentivise user engagement.
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Hellbanning is a practice used by some online community managers for protecting a community against internet trolls and spammers. A user is made invisible to all other users while from their own perspective seems to be participating normally in the community. (Source: Wikipedia)
The technique is meant to gradually turn away the user, growing bored that they receive no attention – because no one else can view their comments except themselves. Jeff Atwood (Co-Founder of Stack Overflow) writes about the fairness and transparency of such invisible forum enforcement techniques (Source: Coding Horror)
Horizontal is a term often used to describe one's business model or business strategy. In this context it focuses on the breadth of one’s product and market.
Horizontal strategies aim to sell a product across multiple markets (moving left to right across markets). Horizontal strategies may suit products that appeal to different sorts of customers, not just a single market segment or industry.
In contrast, vertical strategies aim to sell a product in just one market (moving up and down across a product).
(Source: Entrepreneurs Journey)
“The set of skills which an employee acquires on the job, through training and experience, and which increase that employee’s value in the marketplace.” It may be considered an economic view of a human being – in terms of knowledge and creativity contributions towards an organisation.
(Source: Investor Words)
Relates to a “well defined community with its primary focus directed toward the concerns of its residents”.
Current trends apply the terms when referring to applications that make use of mobile and GPS technologies. Such applications connect users to nearby products or services.
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“Business incubators are projects designed to help new businesses develop and successfully launch. In some instances, the projects are overseen by colleges or universities and are based in facilities located on campus.” (Source: wiseGEEK)
In technology circles YC or Y Combinator is probably the most well known incubator.
“In 2005, Y Combinator developed a new model of startup funding. Twice a year we invest a small amount of money (average $18k) in a large number of startups (most recently 65).” (Source: Y Combinator)
“Coined in the 1980s by management consultant Gifford Pinchot, intrapreneurs are used by companies that are in great need of new, innovative ideas. Today, instead of waiting until the company is in a bind, most companies try to create an environment where employees are free to explore ideas. If the idea looks profitable, the person behind it is given an opportunity to become an intrapreneur.” (Source: Investopedia)
‘Intrapreneurs’ hold many similar characteristics to ‘Entrepreneurs’ any may well leave their jobs to pursue a career as an entrepreneur. Companies seek out intrapreneurs to effect change within their organisations.
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Also referred to as: lean manufacturing, lean enterprise, lean production.
“The core idea is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources.” (Source: Lean Enterprise Institute)
The definitions and usage of ‘lean’ vary depending on context and application. The origin of the word in business can be linked back to the 90’s.
“Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS)”. (Source: Wikipedia)
The key focus is around the reduction of waste whiling focusing on delivering value to the customer.
“Lean startup is a term coined and trade marked by Eric Ries. His method advocates the creation of rapid prototypes designed to test market assumptions, and uses customer feedback to evolve them much faster than via more traditional product development practices, such as the Waterfall model. It is not uncommon to see Lean Startups release new code to production multiple times a day, often using a practice known as Continuous Deployment.” (Source: Wikipedia)
You should note the slight differences between lean and bootstrapping.
“Bootstrapping provides a strategic roadmap for achieving sustainability through customer funding (i.e. charging customers), lean startups provide a more tactical approach to achieving those goals through validated learning.” (Source: Ash Maurya)
An Example of 3 Stages of a Lean Startup (Source: Ash Maurya):
1. Customer Discover (Problem/Solution Fit)
2. Customer Validation (Product/Market Fit)
3. Customer Creation (Scale)
Note that a bootstrap and lean startup have differences and bootstrapping does not mean spending any money.
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Minimum Viable Product (MVP)
A Minimum Viable Product has just those features that allow the product to be deployed, and no more. The product is typically deployed to a subset of possible customers, such as early adopters that are thought to be more forgiving, more likely to give feedback, and able to grasp a product vision from an early prototype or marketing information.
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Non Disclosure Agreement (NDA)
“A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a legal contract between you and another party not to disclose information that you have shared for a specific purpose.” (Source: Business Link)
Such agreements are used to discourage employees and/or business contracts from not releasing sensitive information to others. It is important that you consult with a legal adviser about the content scope of such a document.
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“It means to change direction. More specifically, to make a structured course correction with a business idea, and then to test a new hypothesis or new business model to see if it works better.” (Source: Beat the GMAT)
Companies usually pivot when their current idea is not working or has lost momentum. However you may pivot when you have launched an early version of your product/idea (protoype) and it needs improvement.
Eric Ries suggests “designing products with the smallest set of features to please a customer base, and moving products into the marketplace quickly to test reaction, then iterating. (Source: Forbes)
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Venture Capital (VC)
“Venture capital provides long-term, committed share capital to help unquoted companies grow and succeed. Obtaining venture capital is very different from raising a loan. Lenders have a legal right to interest on a loan and repayment of the capital, irrespective of your success or failure. Venture capital is invested in exchange for a stake in your company and, as shareholders, the investors’ returns are dependent upon the growth and profitability of your business.” (Source: Startups)
There are differing views on taking funding from Venture Capital investors. Some argue that the involvement of VC in early startups reduces the ‘entrepreneurial’ spirit and changes the direction of the company due to the overhanging financial commitment.
“Venture capital firms are only interested in companies with high growth prospects that are managed by experienced and ambitious teams who are capable of turning their business plan into a reality.” (Source: Startups)
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