Editor’s note: This is the second part of entrepreneur and startup expert Greg Langdon’s plan for how Louisville can develop a simple, repeatable process for creating more — and more successful — companies.
Part 1 of this series described a simplified model for how to think about startup companies, as well as a model for the process that can create startups in a repeatable manner — a “startup factory”
Part 2 examines in more detail how to measure the current state of a startup company by looking at its business model and at the team of entrepreneurs that drives it.
This section also looks inside the five stages of the startup factory and maps startups into the appropriate stage based on their business model, team and funding needs. Part 2 closes with some metrics we can measure as we work to maximize the effectiveness of a Louisville Startup Factory.
Measuring a Startup’s Maturity Level
Now we have simple models for startups and for the factory that will produce them. How can we measure what we’re doing in a meaningful way? While every startup is unique, we can identify attributes of each startup’s business model and entrepreneurial team that will tell us a lot.
Here are metrics that we can measure:
Business Model Attributes
• Is the business still in the concept phase?
• Has the business generated any revenue?
• Is the complete business model understood, for example by using a Lean Startup methodology?
• Has the business model been validated by customers, initially through customer interviews and then with revenue from a minimum viable product?
• Is the sales process well-defined, from the initial marketing all the way through to revenue generation?
• Is the cost of customer acquisition understood, and is it viable?
• Is the model scalable and repeatable, with profitable unit economics?
• Is the business model appropriate for the likely funding available?
• Is the business model working in the real world, with customers?
• Is there significant technology risk or competitive risk?
• Does the model include an unfair advantage — patent protection, prior customer relationships, lower cost structure, unique expertise, strategic partnerships — that makes competition difficult?
Entrepreneurial Team Attributes
• Is the core team working on the startup full-time, or is this a side project?
• Does the team include a domain expert with a deep understanding of the problem the startup intends to solve?
• Does the team include a range of skills capable of handling all of the marketing and sales activities?
• If the startup relies on development of new technology, does the team include the range of skills required to architect, design, develop, test, build, deploy and support the product?
• Has the team worked together in the past, and were they successful?
• Have the team members experienced a complete startup lifecycle elsewhere, or is this their first time around the circuit?
• Have the team members invested their own money in the startup? Are they willing to invest on the same terms they’re offering outside investors?
The answers to these questions will establish the maturity level of a startup and identify where they fit inside our startup factory. Some startups begin their life at Stage 3 or Stage 4, while others never make it past Stage 1.
Getting Startups Into The Right Factory Stage
By identifying a startup’s maturity level we can determine the appropriate factory stage for it, and can establish how our startup factory works with it:
We’ll also look at some recent, positive changes in the Louisville Startup Factory and some recommendations for continuing to improve it.