A few days ago we were asked to consult a social enterprise. We wanted to share this story as it is exemplary for most start-ups. We left out names and specific details.
The founder explained that his idea was to get people with a certain disorder, to work on projects that could benefit from traits often associated with this disorder. He had written a business plan, ran a small test project, and had spoken to a couple of investors to raise capital. Unfortunately, without success.
He got caught up in the age-old chicken and the egg causality dilemma: investors need to assess whether the venture is viable, feasible, and scalable, however, to prove the concept, funding is required.
How to go from here, he asked?
We asked: How would you define success?
The founder replied that if he were to get one or more projects, he could get some people to work on the job, which would them a sense of meaning.
He was being way too modest and seemed to lack the confidence and vision to make the future happen, whatever that future that may be.
Investors want to see a strong leader, preferably with a diverse team, that has a clear and realistic vision as well as a decisive plan to execute that vision. You need to be ambitious but not irrational. You have to be confident but not cocky. Consider the 9P’s: Plan, Product, Positioning, Projection, Process, People, Purpose, Profit, and Planet. Be the man with the plan!
Therefore, you have to be bold, we explained, and present your concept with confidence by providing tangible goals and benefits, like this:
- In X amount of time,
- we will serve X amount of customers per year,
- doing X amount of projects per year,
- making X amount of revenue per year,
- employing X amount of people per year,
- thereby creating X amount of customer value per year,
- and X amount of social impact per year.
There is no guarantee for success, however, by understanding the investors’ job-to-be-done, you’re increasing the odds to receive the much-needed startup funding.
Work at three scenarios, allowing investors to consider different levels of risk:
- Most likely,
- Pessimistic, and
Next, start with 5-year planning, then work backward to 2 years, 1 year, and finally 6 months. A simple Excel sheet will do the job.
Investors need to be able to calculate the risk involved, by assessing how much of the projected market is obtainable and serviceable given the design of the business venture (feasibility), and how long it will take for the firm to operate at a profit (viability).
Perceive the business venture from three angles:
- Feasibility – Can we do it distinctively? (identifiable and competitive)
- Viability – Can we do it profitably? (a margin to continue innovating)
- Desirability – Can we do it equitably? (is it fair to our stakeholders)
So, what about the desirability of this particular venture?
The founder explained that according to research, in general, 3% of the population is diagnosed with this disorder, of which more than 80% is typically unemployed.
We asked: How many of these unemployed potentials would you like to employ?
He suggested that 5% in five years would be a great result. So, we filled in the numbers:
- Current population: 17 million (The Netherlands),
- Number of disordered people: 510.000 (3%),
- Number of disordered people, that are currently unemployed: 408.000 (80%),
- Number of disordered people, that could be employed: 20.400 (5%),
- Yearly cost-savings to society: 250 to 500 million euros per year (depending on social security).
Instead of pitching from a series of unclear goals ─ to get some money, to do some projects, to provide meaning to some unemployed potentials ─ the business idea now shows huge potential with incredible impact.
Taking a different perspective ─ in this case, the perspective of who’s to benefit most in tangible terms, i.e., local governments ─ is all it took to help steer this project in the right direction.
We asked the founder to work on the three 5-year scenarios; essentially describing how the organization could look like in five years.
- In terms of the numbers (#projects, #employees, #clients, and so on),
- How candidates are being attracted, selected, and managed;
- How the projects are being organized;
- What a typical workplace will look like;
- How progress is being measured;
- How clients are being acquired, informed, and retained;
- What the future organization structure will look like;
- What systems are in place; and so on.
His next pitch may now start with: “We would like to discuss how [stakeholder] and [firm] can collaborate in saving local communities 250-500 million Euros in total, each year; by providing greater meaning to 20.000 disordered people that are currently unemployed while generating at least the same amount of money as customer value.”
If you can’t make your firm’s goals and stakeholder benefits tangible, it will make it so much harder to attract and involve others in your cause.