Business Model - Dr Jeff Cornwall

Entrepreneurial Start-ups Ain’t Easy

Giants Causeway, Northern Ireland. Jeff Cornwall

Start-ups ain’t easy. They can be exhilarating, rewarding, exciting, and sometimes terrifying. But they ain’t easy.

Semi-Controllable Challenges

Entrepreneurs face a myriad of challenges with their business models during the start-up process. As they engage their customers, they work at finding a real problem and a solution that fits the customers’ needs. Early on, they also face the challenges of finding the right business partners and building the right team. And then there’s the never-ending challenge of securing the finances and other resources to feed the growing business.

Starting a business is hard enough in and of itself, but start-ups never happen in a vacuum.

“Life Goes On” Challenges

The normal rhythms of life continue no matter what. People get sick. Families fall apart. Personal tragedies happen. Entrepreneurship is a vocation that exists within the context of our complex and often disrupted lives.

When people talk about the challenges of work-life balance, it is almost always unidirectional. How do the challenges of a start-up impact my non-work life and create a work-life imbalance? However, the reality is that challenges in our non-work life can create even bigger challenges in our work as entrepreneurs. Sometimes, the non-business challenges entrepreneurs face can create the biggest risk for growing entrepreneurial ventures.

Tyler King, the founder of a personal chef and catering business called Tastify, faced significant health issues during the early stages of his business that could have led to the failure of his new company. First, he had to endure back surgery, which made the physical work of catering impossible for a time. But, Tyler faced the biggest challenge during his recovery from back surgery:

“After I had gotten through back surgery, I had scheduled a wedding for 150 people. It was going to be at the 30-day mark after surgery. I’d be useful, but I needed to delegate a lot of tasks. But a few weeks after surgery, I got infected. It was pretty serious stuff. My surgeon instructed me to go straight to the hospital because I was vomiting. That’s how I found out that I had a staph infection.

“It was about four days until the event. I had people that had been working for me, but nobody that really seemed to stand out except for this one girl that had worked about five events with me, who just seemed to really care. I gave her a call. It was funny. This girl and I actually used to date. We had stopped dating, and she reached out to me a few months later and said, ‘Hey, I need a job. I know that things didn’t work, but I need a job.’

“So, I gave her a call and said, ‘Hey, so this is going to sound kind of crazy, but I have to go back in and go back under and have the staph infection cleaned out. And I’m going to be on very, very heavy antibiotics for the next few days that are going to make me very sick. And we have a wedding for 150 people this weekend. I have some of the food orders in. I know you’ve never been to this venue, I know you’ve never met half my employees, and I know you’ve never met this client, but I need you to handle this for me.'” (from “Tyler King” in Entrepreneurial Voices).

Tyler overcame this set of health challenges and now runs a successful business. How did Tyler do it? One word: resilience.

Resilience

Experts are paying a lot of attention to the importance of resilience in entrepreneurs’ success. Researchers examining resilience find that positive personality, motivation, confidence, focus, and perceived social support all play key roles in protecting people from the negative effects of stressors (Fletcher and Sakar 2012).

Victoria Usher, founder and CEO of GingerMay., suggests that there are three specific steps an entrepreneur can take to improve their resilience:

Face your challenges head-on. In the example of Tyler King, he did not wallow in his health challenges. He faced them head-on and sought solutions to make it through each challenge.
“Innovation”. Usher suggests that entrepreneurs should look at each challenge as a problem-solving opportunity. Innovation is a process that often involves several attempts to reach a solution. Each attempt generates valuable information that will eventually lead to a solution.
“Mentorship”. Seek advice, coaching, and counsel from mentors who can help you improve your business and yourself. From the coaching I do for entrepreneurs, I know that some of the most impactful sessions are those when I help them see above the “fog of battle” when dealing with the challenges they face in life and business. I rarely offer brilliant insight into their problems. Instead, I simply remind them of things they already know but have lost sight of while trying to manage a challenge or crisis.

Usher calls resilience the “new cornerstone for entrepreneurship.” Entrepreneurs find success in start-ups through a combination of adaptation and innovation, a constructive mindset, and a strong network of coaches and mentors that all help to build resilience. After all, start-ups ain’t easy.

Turning Passion into a Business Model

Healthy vegetables — Image by Jerzy Górecki from Pixabay

Many people are driven into entrepreneurship based on a desire to share a deeply held passion they have with the rest of the world. Passion is often the fuel that propels people to take the entrepreneurial leap.

Bootstrap!

Starting with your passion rather than with a compelling market need inherently increases the risk of your startup. There may or may not be enough people who share your passion. Until you test the market, you cannot be confident that there is a big enough market and that your customers will be willing to pay enough to make your business profitable. These are the key elements of a successful business model.

In her article about the five steps to turn a passion into profits, Caroline Castrillon explains how to mitigate the risk of building a business from a passion. She suggests that you start small, don’t quit your day job, set manageable goals, outsource whenever possible, and set a clear vision for the business. These steps help you prove there is really a market for your idea while limiting your financial commitment. These are all foundational elements of bootstrapping.

Pivot Your Passion to the Market

As you bootstrap your startup, you need to use the information you learn from the market to pivot your business model. Wes Moore, founder and CEO of BridgeEdU, says he succeeded turning his passion into a thriving business by learning what problems his potential customers have and using that information to strengthen his business model. This often requires the entrepreneur to pivot from their initial business model to one that better aligns with customers’ needs.

When the Market Doesn’t Exactly Share Your Passion

Getting entrepreneurs with a strong passion to pivot their business model is easier said than done. I have found that they may become defensive when they feel what they are passionate about is being challenged. However, it does not mean the entrepreneur needs to give up what motivated them to create a business based on their passion. They just may need to tweak what they offer. A pivot to the business model may be necessary to better align with what the market is seeking.

Ryan Reisdorf turned his passion for healthy food into a thriving business. However, he had to be willing to pivot his initial offering to make the business successful.

Ryan, a Type I diabetic, wanted to create a business that sold “healthy eating.” He founded his business, called Placemat, to sell healthy prepared meals in Nashville. He got some advice from a mentor at the Nashville Entrepreneur Center that fundamentally changed the value proposition of his new business.

“I pitched him on what I was doing. And he’s like, ‘You’ve got it wrong, man. You’re leading with something that 90% of the world doesn’t care about – health. You’re providing a seamless way for somebody to have a private chef come to their home. That’s it. Nothing more, nothing less. When you get into the home, that’s when you get to talk about health and the why of Placemat. When they take that first bite, that’s when you get to talk about health. That’s where your value is.’

“And sure enough, I took his advice and haven’t looked back. It’s changed the direction of the company.” (from “Ryan Reisdorf” in Entrepreneurial Voices)

Ryan pivoted his value proposition without compromising on what drives him as an entrepreneur — offering customers healthy food. He just needed to adjust how he sold it to his customers. He has found a business model that is fueled by his passion and meets a market need!

Organizing the Chaos of an Entrepreneur’s Life

Entrepreneur getting organized — Image by StartupStockPhotos from Pixabay

I often hear first-time entrepreneurs fret about structuring their workdays and organizing their work.

If they came from the corporate world, their employers had already structured their work. These entrepreneurs talk about being shocked by the chaos of starting a business. It is even more challenging for entrepreneurs who have never had a full-time job. Those fresh out-of-college entrepreneurs talk about feeling lost, lonely, and overwhelmed.

If you are a first-time entrepreneur, take a breath! There are many resources to help you organize your business and your job as founder and CEO.

Getting Organized

Entrepreneurs often use the excuse of, “I’m an entrepreneur. It’s not my nature to be organized.”

Without organization, your productivity suffers. Without productivity, your company’s performance suffers. Without company performance, your bank account suffers.

Peter Strack, Founder & CEO of The Strack Group, argues that organization is a habit, not a character trait. Stack recommends creating a habit of being organized by addressing all aspects of your everyday work. Map out your week, manage your days with to-do lists, and organize your digital work life, including emails, files, and passwords. It may take practice, but with a persistent and dedicated approach to work, even the most disorganized entrepreneur can control the chaos of a startup.

Neil Patel recommends batching your tasks into everyday activities to aid in productivity. He also says that the most successful, organized entrepreneurs focus only on the tasks that actually move their businesses ahead. Many entrepreneurs spend hours on things their business will not need for a long time or may never need. Your job in a startup is to find your market and ensure you give them what they want. Period. If you can’t build sales, nothing else matters!

Your calendar is a critical tool to help you get more organized. Jeanne Rossomme recommends finding a calendar tool that enables you to structure your time and organize your workflow. Here is a review of many popular calendar apps that work well for entrepreneurs. I am an Apple guy. My calendar of choice is BusyCal. It integrates my to-do list into my calendar and allows me to manage it across all my Apple devices. Ultimately, it is a personal choice as to which app works best. Don’t just look at the free options; spending a few dollars a month is worth getting a system that works well for you.

The Need for Speed

Kartik Mandaville, Founder & CEO of Springworks, says that the market conditions of many startups demand that they organize for speed. Mandaville says:

“Startups invariably face competitive pressures from both incumbents as well as other startups. To get ahead, they have to continuously crank up their speed of decision making, product development, distribution and iteration.”

Many startups have a narrow window of time to launch and establish market share. This adds even more urgency to the need to get organized and productive.

It’s All About Time

Our phones and computers are full of apps that are rabbit holes that eat up your valuable time. Jen Glantz, founder of Bridesmaid for Hire, describes it like this in her article at Business Insider:

“Whenever I felt anxious, overwhelmed, or became eager to procrastinate, I’d pick up my phone and scroll through social media. When I took inventory on how I spent my time during the day, I realized I was spending 90 minutes of my workday wasting time on social media.”

Glantz says she puts her phone out of reach during work time and only brings it out three to four times a day during the fifteen-minute breaks she builds into her day. She also has scheduled time during the day to read and reply to emails and limits each time to about twenty minutes.

David Lavenda, VP of product strategy at H armon.ie, suggests that entrepreneurs are well served by starting their days with “me time” in his article at Entrepreneur:

Hannah Rodriguez, Founder of Dream Daily LLC, describes her approach to creating “me time” as an entrepreneur in Entrepreneurial Voices:

“I like to have a start and end to my workday. I wake up, and before I start work and I journal. I have my coffee, read my Bible, and walk outside to get some sunlight before I’m in my apartment all day. And then, towards the end of the day, I’m ready to turn it off. I know a lot of entrepreneurs like work late into the night. I’m done by 5 or 6 p.m. Even though I love what I do, I’m ready to have my night routine and read, watch TV, talk to friends, or whatever. I’m trying to build those boundaries.” (“Hannah Rodriguez” from Entrepreneurial Voices)

Find Well Organized Mentors

Entrepreneurs always benefit from hanging out with other entrepreneurs. They provide both practical advice and moral support for each other. They also help mentor each other.

But be careful who you hang out with. Good habits and bad habits can picked up from your peers. I would make sure to hang out with some entrepreneurs who are already well organized and manage their time effectively. They can serve as role models as you build your business and offer a wealth of handy tips to help organize the chaos of your life as an entrepreneur.

We Must Move Forward

“No man ever steps in the same river twice.” (Heraclitus)

The ancient Greek philosopher Heraclitus may not have been an entrepreneur, but some of his teachings sure do capture the world of startups.

One of my former business partners liked to say that being an entrepreneur reminded him of being a shark. If you don’t keep swimming forward, you will die.

Businesses Must Move Forward

The entrepreneur’s world is like the river described by Heraclitus. Change is inevitable. And change is a constant. Entrepreneurs must never forget that the same changes and disruptions that helped create an opportunity for them at their launch will continue long after they open their doors. If they are not ready to adapt, the change that created the opportunity could eventually lead to their business’s demise. Change in the competitive and macro environments are continuous like the flowing river, creating the need for pivots to the business model throughout the life of most businesses.

Even being a first mover in a new market does not guarantee that you’ll control that market. New competitors will see the opportunity you discovered and come in to take market share from you. You will need to sharpen your business model to ensure you continue to meet the needs of your market and offer the value they seek.

Customers’ needs and preferences evolve and change. You must keep up with these changes and be ready for new expectations. We certainly saw significant changes in customer expectations after COVID.

Demographic changes also create the need for pivots in business models. For example, and one that is near and dear to my heart, Boomers are creating a boom in the construction of 55+ communities. For example, Pulte Homes identified the potential in this market more than a decade ago and now is building communities for aging boomers nationwide.

Entrepreneurs Must Move Forward

Business models are not the only aspect of entrepreneurship that demand change. Entrepreneurs themselves also cannot stand still.

The job description of the entrepreneur constantly evolves and expands to meet the needs of their growing business. Entrepreneurs need to learn and grow as leaders of their businesses.

Entrepreneurs and their teams are prone to boredom and burnout as the business becomes established and professionalized. Even a busy entrepreneur can become bored. Many of us who are drawn to entrepreneurship are drawn to the excitement of the startup. This includes the founders and their founding team members. Once the business is up and running and the founders now have to manage an established company, many entrepreneurs report feeling bored, stagnant, or stuck.

For other entrepreneurs, where the business ends up is inconsistent with their vision. Early on, we often do everything and anything that the market wants from us, sort of an “anything for a buck” strategy. Building a strong market presence eventually requires pruning the offering to the market and focusing on a more specific target customer.

For example, Susan and Jen faced this inflection point in their business, J’s BBQ. Susan describes it like this:

“We’ve always known this part (the brick and mortar) of our brand is not something we planned on doing long-term. We want a better balance for our family, while the brand continues to grow. Reconfiguring our balance is where we’re at right now.

“Our demand has once again exceeded our kitchen’s capacity, and our family’s needs continue to persist. In order to put our next plan into place, we need to shift gears. If you become stagnant or trapped as an entrepreneur, if your current business plan reaches a plateau…you’ve lost the momentum and everyone feels it.” (“Jen, Susan, and Jadon,” Entrepreneurial Voices).

Entrepreneurship is a journey of change and evolution.

“Nothing endures but change.” (Heraclitus)

Catching a Wave Early

Panama City Beach after the storm — After the storm at Panama City Beach. Jeff Cornwall

Surfers often stress the benefits of catching a wave early.

David Allee, owner of Almond Surfboard and Design, puts it this way:

“My personal experience surfing, as well as watching other surfers in the water, seems to continually reaffirm the fact that the ability to consistently catch waves early in their formation results in far greater overall success.”

It is often advantageous for entrepreneurs to also catch a market wave early.

Escape Rooms Come to America

Brothers Jonathan and James and their co-founder Mark caught an entrepreneurial wave early in the escape room craze when they launched their business, The Escape Game. Jonathan shared how they caught that wave in my forthcoming book, Entrepreneurial Voices:

The TripAdvisor wave carried us through the first launch. We didn’t start the business with a grand scheme to grow. We started the business thinking this is really unique. There is no analog. There are no national brands. There are no global brands. There is no company that has more than two of these in the world right now. That’s where the world was in this industry at the time. We said, “Let’s do one; let’s do it really well. Let’s see what becomes of it.” TripAdvisor really helped launch that first store. And then three months in we said, “This is going so well. We have to do more of these.”

As Jonathan rightly points out, being a first mover into a new market can have significant advantages. The advantages of catching a wave early include helping set the standard for the new market and building brand loyalty before others move in.

After about ten years of growth, with the help of an infusion from a private equity group, they now are in 37 locations in 18 states and the District of Columbia, serving more than seven million players since their launch in 2014.

The Perils of Catching Waves Early

There are also disadvantages to being a first mover into a market. Several disadvantages center around the business model. Early entrants often miss the mark on who the market actually is, what that market really wants, and how to connect with them. They can squander precious resources trying to pivot their business model to what it actually needs to be.

And even if they get the business model right, they may not be prepared for the challenges that rapid growth may throw their way! Growth is the most perilous time for an entrepreneurial venture. As my late father often said, “The single biggest cause of business failure is success.”

Or, as SurferToday points out:

“When it breaks, a huge wave can break bones, keep someone underwater for a long time, and even slam a surfer against the ocean floor.”

Fortunately, Jonathan and his co-founders navigated the perils of catching their entrepreneurial wave early. But not all first movers make it to shore unscathed.

The Power of the Value Proposition

I have written before about the challenges new businesses face as they try to get established in the market and build revenues. In one post, I compared new businesses to annoying little gnats flying around in the face of the market.

At the heart of early success for a new business is identifying a compelling value proposition that you can offer to the market.

Your marketing mix, that is the combination of your product positioning, promotional plans, and pricing strategies, all need to reinforce the value proposition you are offering to your customers.

Andrew Gregson explains how pricing reinforces the value proposition in a post at StartupNation.

The most popular pricing strategy for startups and small businesses is to follow the lemmings and charge what everyone else charges or to calculate the costs and target a certain margin. Both are disasters. Following the pack leads to average profits at best. Marking up from costs leaves money on the table.

Even though getting pricing right is tough, it is critical to put in the time to ensure your pricing reinforces your value proposition.

Symptoms of Growing Pains

Image by PublicDomainPictures from Pixabay

“The biggest cause of failure in business is success.”
(A favorite saying of my late father, RM Cornwall)

“Every time the business owned by an entrepreneur who banks with us starts to grow, I get nervous. And if it grows quickly, I go on high alert!”
(A banker who wishes to remain anonymous)

When I look back at a failed entrepreneurial venture, its demise can most often be traced to one of two causes. Either their business model was flawed from the start or they were not prepared for their business model to succeed and had trouble handling the growth that followed.

Business Transitions

During growth, entrepreneurs must lead their businesses through various stages of development. One of the best models to help entrepreneurs understand these changes was developed by Eric Flamholtz. In their book (now in its 5th edition) Growing Pains, Flamholtz and Randle present a practical model that helps entrepreneurs understand the stages of business growth. A fellow entrepreneur gave me a copy of this book in its first edition while we were managing the rapid growth of our healthcare business back in the 1990s. I have been recommending it ever since, and have had the authors as our guest speakers at Belmont several times over the years.

In the early stages of growth, the entrepreneur engages in what Steve Blank refers to as the Search Process for the basic business model. The entrepreneur is finding a gap in the market, and developing a product or service to address that market need. This is where the testing and pivoting of the business model occurs.

Building a Business

Once the business model begins to show signs of market traction, the next stage is to secure the resources the business needs to grow. The entrepreneur must secure the cash, talent, materials, facilities, and so forth needed by the business to support its growth. If the entrepreneur fails to secure necessary resources, even the most promising business model can fail.

In the ensuing stages, Flamholtz and Randle chart the path to successfully navigate growth. First comes the development of critical operating systems, including financial systems, marketing systems, production systems, and human resource systems. Next comes the development of key management systems, including planning, organizing, leadership development, and performance development. Finally, the entrepreneur must build an intentional culture to ensure the sustainability of the values and beliefs the founders brought to their business at its inception.

New Challenges Around Each Bend in the Road

Each stage in the development of the business leads to specific new challenges in the next stage of growth.

The entrepreneur must watch for a wide array of critical symptoms that warn of impending crises involving customers, employees, and the organization itself. If these symptoms are detected early enough, the entrepreneur can act to prevent significant challenges or even the possibility of business failure that can come from poorly managed growth.

Symptoms of Customer Challenges

Customers are the proverbial “canary in the coal mine” during growth. Customers provide the earliest warning signs that growth is not being managed properly.

A fundamental growth challenge for early stage business is selling more than the company can possibly deliver. In their zest to build a successful business, many entrepreneurs get out ahead of their capacity to produce their product or provide effective service. When this happens, the company’s reputation in the market suffers.

Another symptom that a company is having challenges is when it starts to lose good customers. This may be the result of poor quality, poor customer service, or both. Customer retention should be a key ratio for every entrepreneur to watch on their dashboard. When customer turnover reads exceed expectations, an entrepreneur should quickly diagnose the problem and take appropriate actions. Customers have little patience with a business that no longer delivers its promised value proposition.

Symptoms of Employee Challenges

Employees are also an important early warning system for growth problems.

Certainly, the entrepreneur should pay careful attention to staff turnover and employee morale during growth. It can be hard enough to recruit enough new employees to support growth. Needing to also recruit employees to replace disgruntled workers can make it an almost impossible task to keep up with the company’s hiring needs.

Rapid growth often negatively impacts employee efficiency and productivity in their jobs. Employees never seeming to have enough time to get their basic work done or spending most of their time putting out fires may be sure signs that the entrepreneur should slow down growth and take corrective actions.

Other employee related symptoms of growing pains includes poor communication, a lack of understanding of the vision, and a general insecurity among workers.

Symptoms of Organizational Challenges

Finally, there are symptoms at the organizational level that also need to be monitored.

A constant shortage of critical resources, overwhelmed operating systems, and ineffective planning can all be signs that an entrepreneur is not prepared for the growth of the business. I will address all of these more in future posts.

The most disconcerting symptom is when sales are growing, but profits are plateauing or even declining.

No Single Cure

Overcoming the causes of these and other symptoms is no easy task. There is not one magical thing an entrepreneur can do to achieve pain free growth. Over the coming weeks I will be looking in depth at what entrepreneurs can do to help ensure successful growth in their business ventures.

Honesty Makes You Stronger

Life in the classroom is different than it was just a few years ago. Students have had it drilled into them that during class discussions, above all else, they must not offend. A study by the Knight Foundation (conducted in 2019) found that 68% of college students say that “the campus climate prevents them from expressing their true opinions for fear of offending their classmates.”

This new ethic makes open and honest conversations in my classes about business ideas and broader discussions about business related issues difficult to foster.

Cold Reality of Entrepreneurship

The trend of trying “not to offend” has made preparing young entrepreneurs for the world of (dare I say it) free enterprise problematic.

Markets have no feelings. Customers don’t worry about trying to “not offend” a business when choosing not to do business with it. If a competitor does a better job of meeting the needs of the consumer, that is where consumers will spend their money. Period.

My job has always been to prepare entrepreneurs for this brutal world. I do this by challenging them to get honest feedback from the market about their idea by teaching them the tools they need to get information (good and bad) to use to improve their business models. My job then becomes reinforcing the message the market is giving them as I coach and mentor them.

I described my role in a blog post that I wrote a dozen years ago:

Entrepreneurs seem to always have plenty of cheerleaders. Family and friends are there for encouragement and lifting your spirits. A good mentor is someone who will tell you the truth — even if it hurts. My students and alumni will sometimes refer to being “Cornwalled”. When they bring their ideas or fledgling businesses to me for advice, my job is to try to find every weak spot, every possible flaw, every vulnerability they face in the competitive market. One student once said to me, “Dr. Cornwall, you are such a Dreamkiller.” As much as I would love to join the ranks of cheerleaders, I know that my role has to be to help ensure they get their business right and find their way to be able to thrive in the market.

Criticism is Not Failure

A common reaction I see from many young entrepreneurs when they are given constructive criticism of their ideas is that they either ignore the information or they give up on their idea.

Last semester I used our family business in an introductory class as an example of the process entrepreneurs go through when pivoting their business models. When we launched our business, the market challenged our assumptions on multiple occasions. Each time, we used the information to pivot our business model to help our business thrive.

My intent with this example was to offer a concrete example of the reality of the entrepreneurial journey. Entrepreneurship requires open-mindedness, determination, and persistence. My goal was to encourage and inspire them. For many in that classroom, it had the opposite effect — it discouraged and even demoralized many of them.

The message we need to offer to this generation is that criticism is not failure. And in many cases, criticism is a critical ingredient for eventual success.

All is Not Lost

What is encouraging to me is that not all of my students are unwilling to hear honest feedback about their ideas. In fact, if approached the right way, many are actually quite receptive.

However, I have had to make significant adjustments in my approach to teaching young, aspiring entrepreneurs. I have learned to be a bit more measured in how I coach them. Rather than starting with a blast of honesty, I slowly build to a crescendo of constructive feedback. I have learned to be more patient. I have learned the power of being kind, compassionate, empathetic….and honest.

I continue to be very proud of the number of students who are becoming successful entrepreneurs. They understand the importance of listening to the market and seeking constructive feedback from mentors. Most importantly, they are learning to not be offended by honesty.

Pitching Investors in the Post-COVID World

Pitching to investors has always been like playing whack-a-mole. Connecting with the right investor at the right time can be quite tricky.

Now add all the impacts from COVID-19. Angel investors all but disappeared in the second quarter amid he pandemic chaos. Venture capital firms became much more cautious and conservative in their funding, trying to mitigate their risk amid almost infinite uncertainty. More than we have seen in many years, traditional savings skyrocketed as both people and companies fled to cash for financial security.

Many angels who were still investing focused on shoring up companies already in their portfolios with additional capital.

Bright Spots Emerged

Toward the latter half of 2020 and moving into 2021, certain segments emerged as investor favorites. HealthTech, FinTech, CleanTech, EdTech, and eCommerce are seeing a continued increase in deal flow. The success of Zoom is making deals that offer better efficiency in business-to-business transactions a new focus of investors, as well. Deals with strong elements of “sustainability” in the business model are seeing increased attention.

However, overall it seems that investors are moving from hot industries and industry sectors, to a much more targeted form of investing. As the world is disrupted from COVID and the economic crisis, investors are now focusing on a broader range of deals that focus on specific problems arising from the sudden changes in our world. Investors are seeking opportunities that fit what they see as the “new normal.”

Even if it takes a bit of pitching gymnastics, try to highlight any COVID overlay in your business.

Zoom Becomes the New Investment Marketplace

And then there is Zoom….

The events of 2020 brought an abrupt end to localized start-up pitch events. Gone are the days of live Demo Days. The ritual of making the rounds from VC board room to VC board room to VC board room are no longer happening. Gone are the massive investment conferences. Everything is now on Zoom.

The entrepreneurship world quickly adapted to the new normal of raising funding. It had to happen, even with COVID, as entrepreneurs still need funding and angels are still looking for fund deals.

Inboxes now fill up with Eventbrite invitations to Zoom pitch events. Meetup groups now facilitate bringing together investors and entrepreneurs via Zoom. No more standing in front of a room full of investors and entrepreneurs. Now entrepreneurs pitch into the little green dot on their computer.

Just as there was an unwritten set of rules, expectations, and norms for live pitching, we now are seeing a consensus on Zoom pitching protocol take form.

Pitching on Zoom

Some things about pitching have not changed. You need to be compelling and concise, as you only have the first few minutes to connect on a pitch. You need to look and act the part. Dress well; business casual is generally the norm. Since you no longer have body language to communicate your confidence and enthusiasm, you need to show this through your voice.

Here are a few tips specific to Zoom pitches I have been hearing from both experienced entrepreneurs and angel investors:

Make sure you have good lighting. Natural light is best. Avoid any back lighting that may come from windows and bright lights.
Make sure you have a strong Internet signal and have a backup plan.
Technology matters. Invest in a high quality webcam if yours on your computer is not very good. The same goes for your mic. When recording classes for my university students this past summer I was blown away by how much better the video and audio were when I upgraded from my 2015 MacBook Pro to a 2019 model. I went back and re-recorded all the lectures I had done on my “old” MacBook Pro. It made that much of a difference!
Calm yourself before you get on Zoom. Most of us do this before a live pitch, but forget how important it is to be “centered” when hopping on Zoom for a pitch.
Don’t pitch continuously for more than about 5 minutes at a time. Break your pitch up and go off of screen share to answer questions and to help keep them engaged.

Pitch Deck 2.0

Even the pitch deck has evolved post COVID. You should have two versions of the same pitch deck prepared.

First, entrepreneurs still need to prepare a traditional pitch deck for live pitches on Zoom.

The second is what is being called an investor pitch deck, an annotated pitch deck, or a stand-alone pitch deck (there is still no consensus on the preferred term). It should be organized exactly like the deck used for your live pitches, except that most of the slides will be split in two. The one side includes the same graphics used in the oral pitch. The other side includes a short narrative including what you would be saying about that slide during a live pitch.

Use the widescreen format for your deck to make plenty of room for the two sides. There should be no more than 150 words per narrative section on each slide on the narrative side, with the ideal word count being about 50-100 words. There is no need to include the narrative side text on slides which are self-explanatory, such as financial summaries, timelines, and so forth. The split between the two sides should be about 40% for narrative, and 60% for the graphic side.

This is the version of the deck you want to send out to investors who want to preview your deal before meeting with you over Zoom. Think of it as an executive summary of your business plan with pictures.

The Good News into 2021

Deal flow is increasing as we enter into 2021. The strong market on Wall Street and cheap capital has buoyed investor confidence and their portfolios. We are seeing more angels get back into seed investing, which is outstanding news for startups!

Unless COVID takes a nasty turn for the worse (what John Mauldin calls the “gripping hand” of the economy), things are looking up for a better year for startup entrepreneurs.

Hopscotching Your Business Models

The coronavirus and economic crisis have certainly challenged many entrepreneurs to do some serious re-evaluation of their business models. One of my friends compares it to being a toddler playing at the beach, getting knocked down by wave after wave after wave. More often than not, this has resulted in more hopscotching than simple pivoting when it comes to business models. Rather than incremental changes, known as pivots, entrepreneurs are being forced to reinvent their businesses on the fly as the pandemic creates seismic disruptions in society and in the economy.

Typical Pivots

Significant pivots in business models are common during the early days of a new venture. We pivoted the business model of every startup I have ever launched once we opened for business and received feedback from the market. In the days when we relied on formal business plans to guide our startups, some of these pivots could be rather jolting. Today’s business modeling tools facilitate a more incremental process of pivoting during early days of a new business. Steven Blank refers to this as the searching stage of customer development.

Once the searching stage leads to a clearer picture of what the market truly needs our business model to be, the execution stage begins. This is where the focus shift from customer discovery and pivoting, to scaling and building business infrastructure.

Hopscotching the Business Model

The disruptions being caused by the coronavirus and the governmental policies that are following the outbreak, force established businesses to jump, or hopscotch, to a new version of their business model or even a new business model entirely.

Some of these are more survival strategies. For example, distilleries across the country have shifted some or even all of their production capacity to making hand sanitizer. Such efforts have helped ease the temporary strain on the supply chain for hand sanitizer until the market can stabilize. Restaurants, with their dining rooms temporarily closed, are turning to curbside service, grocery sales, home delivery, family take-out meals, and so forth to bridge the gap until they can return to business as usual. Boutiques have found that people are buying fewer new outfits, as we are mostly working from home. So many have decided to make face masks a fashion accessory.

Some changes in business models look to be more permanent. I have already highlighted changes in travel and music that are likely to be more permanent post coronavirus. I plan to look at other industries over the coming weeks.

How to Navigate the Need to Hopscotch?

So what is an entrepreneur to do during such a crazy time?

Steve Blank suggests using a tool called the Market Opportunity Navigator to help uncover new opportunities for a business to pursue amid the coronavirus. In his blog post, Blank offers a great case study to illustrate how a healthcare company discovered how to hopscotch its business model.

Ted Ladd offers a process in a column at Forbes that is helpful.

The first step is to deconstruct your business model to its core parts using the Business Model Canvas. As I tell my students, the business modeling tools we have at our disposal today are not just to help you launch your business. They are powerful tools to help you navigate your business through the many changes that are likely to come in the future, even in “normal” times. This article in the Cape Cod Times offers some specific things to consider when deconstructing and re-evaluating your business model.

Next, Ladd suggests that entrepreneurs reimagine each part of the business model, using creative thinking processes, to reinvent each part of the model in the new world created by the pandemic.

Finally, Ladd suggests that, just like you did at the startup stage, you need to work with your customers (which may be entirely new customers) to test and refine the new elements of your business model.

SCORE offers three tips for those hopscotching their business models:

Don’t forget the need for quality in what you offer, even if it is a temporary change in your model.
Stick to what you know — don’t forget your core competencies.
Don’t leave your old customers behind.

The Need for Resolve

One of the first blog posts I made as the coronavirus crisis began to unfold was about resolve. As I stated at the end of this post:

The resolve we are seeing among entrepreneurs will pay off for our economic future. It will take time and hard work, but these entrepreneurs are the ones who will lead us into our next economic expansion….and we will have one!

To ensure this bright future, don’t just get ready to pivot — get ready to hopscotch!

Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.

Category: Business Model