Setting the Startup Accelerator Pedal

November 29, 2010 • David Skok

Startups frequently make one of two mistakes: spending too much money, or spending too little money. A key job of the CEO is knowing where to set the startup accelerator pedal. In a recent series of three blog posts published in GigaOm, I discuss the three key phases of a startup lifecycle, and how each phase requires a different focus, and approach to spending.

The three blog posts can be found here:

Part 1: Accelerate Your Startup: Get the Right Product/Market Fit

Part 2: Accelerate Your Startup: Develop a Repeatable Sales Model

Part 3: Accelerate Your Startup: Spend to Scale the Business

 

The diagram below summarizes the three phases and the different approaches to spending.

 

image

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  • Eric Schurr

    These articles are excellent advice and right on the money (pardon the pun). I’ve always been amazed at very early stage startups that raise an incredible amount of money and then burn it all away while they are still trying to figure out if they have the right product/market fit. Often times they re-invent themselves as they take their product in a different direction while resetting the cap table and diluting everyone who put a lot of money and effort into it. David’s advice is not only accurate, its actionable.

  • Luke Vincent

    Wow, that is really useful and helpful overview. Simple, clearly mapped out and something I didin’t know.

    One question: In your mind how important and at what stage is it worth investing in a clearly defined brand model (positioning, benefits, reason to be believe, value proposition etc).

  • http://www.forentrepreneurs.com David Skok

    Luke, while I wouldn’t use the term Brand model, as I tend to think of branding in terms of other things (logos, colors, how the company is experienced by its customers, etc.), I do believe that you need to be working on the positioning statement very early on. The best positioning statement is the one that Chasm Group came up with:

    • For WHO?

    • Who needs WHAT?

    • Our CATEGORY?

    • Provides: KEY BENEFITS

    • Unlike KEY COMPETITORS

    • We provide KEY DIFFERENTIATORS

    Simply fill in the pieces that are in capitals. Turns out to be one extremely important exercise, as this defines which targets marketing and sales should approach, and what their messaging should be to those prospects.

    Don’t worry if this changes rapidly as you learn. It is good to be quick to incorporate feedback that you get when taking this to market.

    I hope this helps.
    Best, David

  • Broadcastic.com

    Not cool reposting your old posts

  • http://www.forentrepreneurs.com David Skok

    Not sure what you are referring to. This post has not been reposted or edited in any way.

  • Chibuzo james nnaji

    i have started and i lost all  my cash but gained  high demand for all my products . how do i raise myself again as i have had very interesting experience.

  • S Skidmore

    This is sort of an academic question about investment in engineering/developer vs. marketing resources and what crossover curve looks like. I’m giving a presentation and want to make a point that in the early stages most $$ are spend on engineering. As the company grows and is successful, $$ must get shifted toward marketing. If I make vague lifecycle categories of “startup”, “funded”, “growth”, “fortune/continuing”, I’m guessing somewhere between funded and growth the two might cross with marketing continually growing from that point on and is prob equal or more than engineering by the time it’s in “fortune/continuing”.

    I’d love to find some sort of report or quote or something to give some validity to my theory (or allow me to adjust my theory if I’m wrong)

    Any thoughts? 

  • http://www.forentrepreneurs.com David Skok

    Your theory is correct, with one important caveat: although the proportion shifts, it is very rare for the actual dollar amount going into R&D to drop, as the workload never drops after shipping the product.
    As for where to find that quote, I can’t help you.

    Best, David

  • S Skidmore

    Thanks! (ps. I’m friend of Michael’s who he uses to build and design his presentations and funding decks. Nice to meet you :-)