Planning for Higher Sustainable Competitive Advantage (SCA)

I find that pitch decks to investors fail to articulate how they will maintain a market lead and build barriers to entry around their business over time, as more competitors emerge. We teach 17 ways to increase SCA at The CEO Boot Camp and in our scaling consulting work.

 

I would recommend adding two additional slides to the standard 10-12 most have in their decks. This will impress investors far more than some fancy graphics or massive TAM market claims. Slides to add:

  1. Sustainable Competitive Advantage (SCA) - How will you evolve your barriers to entry over time. The "Moat" which can create higher PE ratios. Product roadmap and innovation? IP? Brand? Partnerships? Etc.
  2. Market entry strategy, which is not the same as Go to Market strategy. This shows expanding markets, niches and the $1B market opportunity - which NO startup should ever enter initially because then they are competing with giants on day #1. A slow suicide strategy. 

 

These two additional slides...

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When A Startup Founder Hires A Professional CEO, Does He Need To Have An Industry Background?

A good question, and one most professionals get wrong. Even professional recruiters. Although this can depend on many factors, generally speaking the CEO does not need to come from the industry. 

 

The existing employees and team should bring the industry and domain expertise. If it is a raw startup with no staff, that is really a co-founder, not a “CEO hire”. And no good CEO is going to work for a founder that has little experience. Most experienced CEOs do not want to take raw startup risk, they come in later when the risk is fleshed out and scaling up is the challenge. The founder better bring large industry experience and/or management experience and a killer business plan, having completed deep market research, competitive intelligence, and other development work. A company is worth zero dollars until this is done.  

 

It is often better if the CEO is not buried in the industry standard belief systems, as then they can go beyond it. Any company...

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How Big A Market Should A Startup Company Target?

The best way to destroy your credibility with investors is to say we are going to attack, and own, a multi-billion dollar market. Although this may intuitively seem to attract investors, in actuality it is a fatal mistake raising capital. Your credibility using $100B or $1 trillion markets is shot to hell. Here is why.  

No startup should be going after a market larger than $1B five years out. An ideal market niche size is between $100M and $250M. Niching down is not optional. It is basically suicide to tackle huge markets. Even better is a series of niches in a portfolio of markets shown below.

I have often done with 100% success a “Portfolio of niches” strategy for market entry. This means laying out and ranking many niches and then prioritizing them by various factors.  And it sets you up to be very agile, too. The product roadmap and target niches expand each year, as shown below. The first chart shows the long-term market potential for a horizontal product...

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How Do You Determine The Distribution of Equity Among Co-founders When Starting A New Company?

There are many factors, and it is too complex to offer a standard answer. You need to hire a consultant that is a CEO/Founder with lots of experience to discuss things for 1–2 hours.

One way around this is to set hourly rates for the founders and track time to allocate it according to contribution. Shares are earned with seat equity. A simple spreadsheet with monthly invoices submitted by everyone is easy to do. There are plenty of software solutions for this too, but likely best only when it gets complicated with many founders.

People and Founders are never “equal” in what they bring to the table. So, splitting 2 or 3 ways is not usually an unfair solution.

Factors to consider:

  1. Relative time and contribution to sweat equity - some may do little and others may work full-time or more. That is why tracking hours and market rates works well.
  2. How much capital will be needed and will Founders contribute? S
    • Always separate purchased shares from “Founders...
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The Top 26 Reasons No One Should Ever Support Donald Trump in Any Capacity

It continues to amaze me how ANYONE is willing to vote for Donald Trump. Sure, we need to get back to more conservative values (obliterate DEI, quotas and the out of control woke nonsense like pretending transgender people are normal and educating young children that this is okay), fiscal policy and reduce government by maybe 50%, or more at all levels. Do not get me wrong, I am 100% for equality of treatment of people. Just not equal outcomes. It seems our younger generation cannot tell the difference.

Trump is clearly not very bright, is totally unethical, is a prolific criminal and will be going to jail soon too. I doubt anyone ever got indicted for over 100 felonies and got off without a jail sentence. Only corruption in the system would prevent him from getting a long sentence.

How can anyone think voting for him, instead of insisting on better candidates, is a good thing?! It means they are either ignorant of the facts (listed below which are in the news everywhere), dumb or...

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If I Pitch an Idea to a Private Investor, What Happens If They Steal It?

Ideas are worthless. And it would be totally legal for them to steal them. Maybe you are confusing patents, copyrights and other intellectual property.

An “idea” has no legal protections. And you can be pretty sure you are not the first one to have any given idea too. And if anyone can steal a single “idea” and replicate your business, it is a very bad business. What you need is lots more including many things like a business model, target market, product/service and hundreds of ideas.

 

Companies need a team, plan and many protectable ideas. These are protectable intellectual property when kept as trade secrets, patents and copyrights. Almost every company should have some of these and contracts with employees to prevent them from taking them.

 

Investors do not sign non-competes or non-disclosures because they need to meet too many people.

 

Frankly, if your “idea” is all you have, you should not be talking to investors as you are...

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What Are the Best Practices for Building A Strong Team Culture in A Startup Environment?

Here is a short list, but there are many more things which come only from experience and feel interviewing. This is why it is best to have at least 15 years' professional experience before starting a company.

  1. Hire the best people you can afford, using stock options to find the ones that really care about the mission and will take submarket salaries to be on the mission.
  2. You need 3 key founders: Operator, visionary and sales/marketing head. All with 15 years' experience and long-term commitment. Ideally, willing to put in some cash too.
  3. CEO should screen first 100+ employees personally to set the culture well. Maintain a flat organization as long as possible, often until you have 15 employees, to avoid politics and have strong communications. All startups are a learning experience and need to adjust and pivot.
  4. We call the ideal culture a Darwinian Meritocracy(TM). It evolves with all inside and outside factors (agile, reorgs) and rewards results, honesty, shared values, hard work...
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How can you ensure consistent customer service training for employees in your small business?

It all starts with a strong, documented values statement that is taken very seriously at every stage. This means enforcing it and using it as a basis for reviews, bonuses, and promotions in a visible way.

Here are more key component of a process that will work:

  1. Training for employees in this and your company's value proposition. Including ethical behavior for long-term, mutual benefit. A win-win relationship with customers, not a transactional one. A culture of customer service. Employees are not allowed to bad mouth customers. That is attitude and can run off the rails if not limited.
  2. Use video recording Learning and Development system (LMS) for consistency and easy initial training to guarantee every employee is trained and tested properly.
  3. Have a customer feedback loop, like listening in on calls, as Amazon executives are required to do. What is watched is taken seriously. This is called the Hawthorn Effect. i.e. a sign-out sheet on the supply cabinet reduces theft because it...
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How Can A Young Tech Company Compete Against Established Players In The Market?

Startups should never, ever, never compete with big companies. They must offer something different. “Differentiated” is the most important word in designing a startup market entry strategy.

Look at this diagram and decide how you can adjust your company to be in the top right quadrant. Without that you have no chance of surviving, never mind profiting, because you will compete with companies 100 to 1,000,000 times larger than you with already developed marketing and sales channels and huge budgets.

 

 

Only these kinds of companies will attract investors (needed to grow) and top employees because they know the stock options can be game changers for their personal wealth.

See my free course on the steps and skills to design, build and launch a startup here:

 

Over 80% of startups fail because they do not prepare well. This takes 15+ years' experience with 5 going to learning some technical or industry skills, 5 going to learning to hire and manage...

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What Are The Key Skills And Qualities That Every Successful Entrepreneur Possesses?

I have a free 1-hour course on the skills that must be possessed by the senior team collectively. This can be viewed here:

The personality traits that a strong entrepreneur must have include:

  1. Tenacity and the ability to ignore naysayers when they have deeper understanding of the problem the company is trying to solve
  2. Vision - The ability to see the future trend they are either creating or trying to leverage
  3. Intelligence - The critical thinking skills to properly weigh the many factors that are needed for most business decisions
  4. Leadership - The ability to convince others to follow them which comes from showing the skills and personality traits listed here
  5. Management skills to recruit and manage quality people, especially managers and people with passion to build out the needed skill sets
  6. Innovation - The ability to see beyond what the solution to the problem is today and design a significantly better one that can be delivered with a profit
  7. Focus - The ability to focus on one...
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