No One Wants to Pitch Prematurely

As a special 2nd session this week, Steve Barsh, experienced CEO, entrepreneur and senior executive, led a discussion tonight on De-Risking Your Business Model. Steve is currently an entrepreneur in residence (EIR) at First Round Capital and an active Guru for several DreamIt Ventures companies.

Steve’s presentation was a how-to for de-risking your business; building upon the insights shared by many of our other speakers. According to Steve, entrepreneurs often seek capital before adequately de-risking their businesses. Investors consider the attractiveness of the business (return) as well as uncertainty (risk). For most investors, it is a balance act. He encouraged Innovators to think outside the box. For financing he offered bootstrapping, angels, and customers as alternatives to Venture Capital. “Customers financed many of my new products.” Not only did they provide real feedback; but they also required no equity.

To dissuade doubt, he recommends entrepreneurs stop waiving their hands and start pointing-- turning assumptions into facts. Two methods he recommends are hypothesis testing and use of proxies, a capital efficient method for de-risking. One company Steve is mentoring shared their experience with a recent product introduction. They were interested in determining how much someone would pay for their product.

The remainder of his presentation focused on types of risk and techniques he’s used to reduce uncertainty. Main areas to focus on include the management team, product development, competition, market size, customer/market demand, pricing, marketing, the sales cycle, capital demand, execution and exit value. Steve opined that programs like DreamIt Ventures help entrepreneurs in the de-risking process by providing an environment for providing feedback. One advantage is the exposure to other entrepreneurs and seasoned mentors who may all out assumptions. They provide an opportunity for unbiased brainstorming as well as challenges in a safe environment.

Thank you, Steve, for your continued insights. Click here to read Steve’s blog or review the presentation.