The Startup Discovery and Innovation Model
Iteration
Execution
Customer Discovery
Customer Validation
Customer Creation
Customer Building
Turn hypotheses into facts
Identify scalable and repeatable sales model
Source: Blank & Dorf , The Startup Owner’s Manual
Due diligence should help you figure out what the company’s key hypotheses or big bets are. These then let you determine the key experiments and milestones the company will need to achieve to validate that they are, in fact, correct. This will take many iterations to get it right. Hitting these milestones creates major valuation increases as you move from iteration to execution. So your money should pay for the market testing required to hit these milestones before you go back to the financing community for more investment.
Barriers to Entry Think of it this way: If it was easy, someone else could do it cheaper than you. Embrace the difficult! These hard-learned lessons are called Barriers to Entry. — Dr. Steve Gedeon (I had to quote myself at least once in my own book.)
Ian Bandeen, NACO Co-Chair 2015–16, gives this advice to Angels about validating key assumptions: “Avoid this trap! Just because you were successful once, don’t assume you know everything. Don’t be arrogant. Know what you don’t know, and assume everything will take longer, and cost more money, while you learn, learn, learn.” The biggest valuation increase occurs when you validate that your business model is scalable, and investor risk is reduced by executing on a known plan.
How to Achieve Good Returns
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