Johnson Cook

Atlanta tech investor. Entrepreneur.

Johnson Cook - Atlanta tech investor. Entrepreneur.

Deal Evaluation Tool: The 3 Traits of My Next Startup

 

Recently I was taking a look back to evaluate some of the best startup business ideas I’ve seen.  I was hoping to find a checklist that could be used to gauge “what makes a good idea?”   Not surprisingly, there are so many moving parts around the team, timing, market, strategy that creating this checklist is a next-to-impossible task.

So I took a different approach. I looked at our database of startups and said “Which of these would I personally want to launch today… given my personal style, experience, and resources?”    That list is much smaller than the “good idea” list. So then I was easily able to pull out three top traits of the businesses that I would launch today if I were looking for something to do.

1. B2B and starting focused on the low end.

In some respects, selling to SMB’s is like the B2C of the B2B world. That means lower price points. Lower touch required for selling. Automation tools play a key role in lead gen, nurturing, closing, and customer engagement. It means you have more customers using the product earlier so you learn and iterate faster. But unlike B2C businesses, these customers are usually paying you, so you have more customers but also faster to cash-flow positive.   As you learn and grow you likely will go up market and sell to more enterprise customers, and this usually makes sense for businesses that start out selling to SMBs. If you have enough customers and cash flow, then you have the luxury of choosing to go farther up or down market.

2. Massive upside in the solution: ROI can be reasonably argued to be unlimited.

I could never sell something to HR departments. It’s just not my style. I don’t want to sell a risk management solution where the absolute best case scenario of my tool helps their risk go to 0%. The problem with that is that ROI can be calculated and it has an upper limit.  I love selling tools that help companies dream bigger. I want them to see that the “closing one more deal” is just to cover the cost of my offering, but what they are buying is not the ability to close that one more deal, but to close hundreds more deals! And then to grow that monthly!  I want to sell something that is inspiring and looks more like a Larry Page’s 10x idea to the customers buying it.

3. Constant, heavy use.

The most beautiful example of this is Salesloft Job Change Alerts. Although it’s a free product, I use and depend on it every single day.   Without heavy utilization, value can disappear or be forgotten. Being front of mind of the customers is key to building a high growth company.

Again, these are just the top characteristics based on my personal style. It’s a good exercise if you are evaluating ideas for yourself. Build a checklist.   If you are already in your business, it would be good exercise to define why you love your business. Understand the reasons you think it’s going to change the world and be able to articulate that to anyone you meet.

ps. If you happen to have a startup that meets my 3 traits above, I want to hear about it…  johnson.cook@atlantaventures.com

 

 

 

Category: Ideas
  • D-Train says:

    These are great words, and things I believe to be on point. I’m looking around several startups now, and see that they’ve learned this very point and are tackling the SMB market aggressively.

    This bring me to a blog post I wrote about recently with small shops that exist largely in the non-English as a primary language businesses. I’m looking around at the businesses, for example, around Buford Hwy. These businesses are not so different from our traditional “American” businesses. What they don’t receive, however, is a lot of attention from app developers. The language gaps have been in a stumbling block.

    In any case, I’m curious what your thoughts are for this market. I’ve summarized my thoughts in the following link. Maybe you can noodle on it… http://scninjaskills.blogspot.com/2013/10/our-new-tech-doesnt-empower-english-as.html

    October 21, 2013 at 1:44 pm

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