Business Plan and Business Model for Startups

Business Model
Here is the problem: You are a team of great developers and you are building your dream product. But you have no marketing or business skills. And you’re still thinking of getting some 50k accelerator/seed funding, or even a bigger VC investment.

Well, you are not alone. A lot of tech startups are in the same situation: Where can I sell my product? Should I think about my target audience from now or should I build my product first? should I spend time developing business plans, as I have no idea about financial etc or should I just develop whatever I have in my mind? And where can I find resources to help me? My view is that every startup builds two engines: A Technical Engine [app/web service/packaged software/etc] and a Business Engine [what are the functions/processes/methodologies aka the business model that will make my tech engine produce $]. Because I may be building a great product but if I later realize that I need to spend 30 euros in marketing to get a customer who will give me 10 euros, then I’m having an issue…Most technical startups are geared towards the Technical Engine which is within their comfort zone and tend to leave the Business Engine thinking for the far end..Developers love technology, features, functionality, creativity and don’t love that much to spend time thinking on the mechanics of converting users to $, promotion channels, marketing ROI etc.
My recommendation is that you should do the business model/plan exercise and you should go into market research/ marketing channels/ cost of sales/ marketing ROI/etc and design your Business Engine, in parallel, or even before, your Technical Engine. As Steve Blank interestingly notes in his lesson (see below), the Startups are not just building products. They are exploring a sustainable Business Model.
What do VCs/Investors/Angels want to receive? Usually you will be seeking funding from accelerators, or incubators, or Seed Capitals, or VCs. It seems like there is no standard rule on what these investors want to receive. Some investors want to see just a 10-15 slide deck with the business model/basic business plan and other info. Some other investors may want to get a fully detailed business plan with many pages of excel spreadsheets/etc. Ycombinator has an even simpler form (e.g. see how Dropbox did its application to get accepted to Ycombinator, here). You can also read how Ycombinator thinks about applications here. Of course, the less the budget to be invested, the less the information required usually.

Some resources to get you started:
Step 1: Learn what is a Business Model vs a Business Plan: http://steveblank.com/category/business-model-versus-business-plan/Step 2: Watch the free e-learning course of Steve Blank on what is the Business Model Canvas: https://www.udacity.com/course/ep245 . This is a great course on what is a business model and how to develop your own.
Step 3: Go to www.leanlaunchlab.com and get a free account to work on the Business Model Canvas with your team.
Step 4: Some VCs/Seed Funds may still require a business plan. Remember, the two most important questions that usually VCs do are: How big is the market you are trying to enter and what percentage of that market do you plan to get in the next 3-4 years. The Business Engine that you design together with your Technical Engine, should explain the “how” you will get there. Here are some resources on Business Plans:
– How to write a Business Plan that VCs will fund: http://entrepreneurship.berkeley.edu/resources/BPS_Business_Plan_11_30_10.pdf
– Find useful resources from Berkeley’s entrepreneurship site: http://bplan.berkeley.edu/compete/resources.html#gr
– See what Sequoia capital is saying about Bplans: http://www.sequoiacap.com/ideas
– Read this: http://venturehacks.com/articles/deck
– How NOT to write a business plan: http://whohastimeforthis.blogspot.com/2005/11/how-to-not-write-business-plan.html 

- Get some online courses about startup financing at udemy (e.g. this one seems interesting from its description)

- Visit Quora (www.quora.com) and search for answers regarding business models/plans/conversions etc

HOW CAN  I CONDUCT A MARKET RESEARCH?

For US customers, you can use www.aytm.com (askyourtargetmarket). This is an interesting service in which you can make your questions and get almost real-time answers from customer segments that you choose. The cost is around 1USD per respondent, with a minimum of 50 respondents.

For potential customers in your own country, you have to be creative and go out from your office and ask as many as possible (e.g. around 200 customers if you plan to make a mobile application).

If you are preparing to create a software solution for business, a nice practice could be to start a free pilot for some companies. This would give you the allowance to make a cold call to some companies, letting them know that you are designing a new solution that might be useful for them, you plan to have them in the free pilot and you would like to have a short 1:1 meeting with them to discuss the specs.

WHERE CAN I FIND MARKET DATA?

a.The CIA factbook has many updated information about countries and economies: https://www.cia.gov/library/publications/the-world-factbook/

b. If you try to put a facebook ad, you will find interesting demographics for each country

c. For US you can use EasyStats: http://www.census.gov/easystats/

d. For US you can find many sources at the Census Bureau: http://www.census.gov/main/www/access.html

e. Economic data for US at: http://www.census.gov/cgi-bin/briefroom/BriefRm

f. You can ask ICAP about the size of businesses that they have in their databases, or purchase lists.

g. Search the EU site for market data in EU: http://ec.europa.eu/

h. Use search engines, Wikipedia etc

I. You can always buy industry reports from many different vendors.

K. If you have your own e-mail list of customers to survey you can use online software, e.g.: http://questionpro.com/ or create a survey on Skydrive with Excel: http://blogs.office.com/b/microsoft-excel/archive/2012/11/16/excel-surveys.aspx

l. Use: http://www.statisticbrain.com/

m. Use: http://pewinternet.org/Data-Tools/Get-the-Latest-Statistics/Latest-Research.aspx

n. Use: http://www.pewresearch.org/

If there is any Greek startup that can share any additional resources on business plan templates/advices/ etc, it would be very helpful for the community!

Where Can I Find Information About Business Models and Monetization Strategies?

- There are several monetization strategies to look for, depending on the industry you are targeting and the kind of solution you are building. Go to http://www.monetizationlab.net/ to find some interesting information.

- Moreover, watch the one-hour video of Dave McClure at http://vimeo.com/26277733, in order to get an idea of the Acquisition-Activation-Retention-Referral-Revenue methodology and some numbers you can expect for your startup.

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