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Startups in WI Need the 3 C’s: Customers, Connections & Capital

As startups, you need assistance with everything.  However, there are the 3 C’s which are the most critical and encompass many areas of support that you will need.

Customers Are King

The traditional sense of this phrase is that if we treat our customers as kings or queens, then they will be loyal, long-term supportive customers – the goal of every business.  However for startups, the customer or even ONE customer can make the difference in your business succeeding or failing.  We must have product validation – will someone buy our product, do they perceive value, what is that value?  All of these questions need to be answered and proven in the market place to move your business to the next stage.    Startups do this through product trials, feedback, testing, changing the product, more testing, more feedback –it’s a continuous cycle and we need supportive, interested customers to work with us through this and to then buy our products – the ultimate validation.  In the end, the customer receives a great product that will help their business and the startup has validated their product in the marketplace.

Connections – It’s Who You Know

This saying could not be more true in the startup world.

  • You need connections to Capital.  You need your Capital Connections to be connected to other Capital.
  • You need connections to Customers, who will then be a reference and provide you with connections and references to other customers.
  • You need connections to Partners that may help distribute your product.
  • You need connections to advisors, board members, business development contacts, services companies (legal, accounting, audit, patent, HR, etc).  To find and verify all these services is a daunting task for a startup.  Having trusted connections that can filter and refer the right connections is invaluable.
  • You need connections to build your C-Suite.  At every stage your management team will be evaluated.  It’s not likely your college roommates will be the right c-level management team for you.  You want the right experience in the right positions that enable you to build the business and bring credibility to your venture.  You will need to find these people through many different connections and again, you want to evaluate your c-suite based on their connections and ability to help the business.

Even if you have been in your industry for many years, you will not have a network that includes all these connections.  Build out your network in every conversation.  Ask for connections to customers, capital, advisors or other contacts that will be beneficial to your business.  Evaluate your investors, advisors and board members in part with their level of connections that they can bring to the business.  You can send a lot of emails and make a lot of calls which will not open a door, but a warm referral from a trusted connection will general open the door every time.

Capital – The Need is Constant

Even before you start your company, you require capital.  Once you start down the investment road, the need for fund raising will be constant.  Of course this ebbs and flows with customers and revenue.  However, at each stage you will have to evaluate organic growth vs raising capital.  It is a constant process, you will do this every day.  In WI, there are many supportive Angel groups and more popping up all the time.  Unfortunately, we only have four VC’s in Wisconsin.  In 2013, there were only 26 deals for a total of $67M in investment.  This pales in comparison to national numbers.

It makes it difficult for our WI companies to compete when there is insufficient capital available in the state.  This requires our companies to seek capital outside the state which is costly and the effort is hampered by the lack of connections within our current ecosystem.  Our established companies can help tremendously in this area.  We have companies such as American Family and MG&E who are investing back in to our WI companies.  A strategic investment by an established company is tremendous validation for a startup company and provides needed capital to continue to develop the product set.  An established company then has access to this technology to create strategic advantage.  It’s a win-win if we can create more strategic investment within the state.

 

Why a Wisconsin Partnership Pledge?

In the Governor’s Roundtable on Entrepreneurship, Governor Walker asked a group of entrepreneurs for things that would help the startup ecosystem.  Of course the most important thing for startup companies is customers.  Customers validate your product, generate revenue and give you critical feedback as you are growing your business.  I proposed that we foster this connection of startups and established companies.

I had also just learned that a competitor from CA was being used at a large HC organization here in Madison.  I thought – why didn’t we know they needed a solution like that?  Why didn’t they know SOLOMO was here and could provide this solution?   In Wisconsin, there is no established way to foster the connection and provide visibility between established companies and early stage companies.   Thus, we need a more predictable way to connect these companies and potentially R&D tax credits or other incentives for established companies to participate in a meaningful way.

There are clearly different levels of support that early stage companies require as outlined the pledge (link), including Mentorship, Customers, Solving Real-World Challenges, and Investment.   Participating in the Pledge will raise our startups visibility and connect them more directly with established companies that have a specific interest in their industry or technology.

There are also many benefits to established businesses, including access to new technology to differentiate you in the marketplace.  It’s hard to keep your current systems running and find time to investigate new technology.  Our startups can do that work for you and you can provide feedback, do customer trials and implement the technologies that are of benefit to your organization.

In the future, we’d like to lobby for tax credits or other benefits for our established companies in order to help incent you to participate at higher levels.  Sponsorship will help with these activities.

Sign up to take the Pledge – what can you do?

Bright Idea: WI companies working with WI Companies

Recently, I was asked by the Capital Times for a Bright Idea for 2014.

In 2014, I will promote the growth of Wisconsin’s technology ecosystem with a “buy local” approach – but instead of food, I’ll apply it to Information Technology products and services. Under this initiative, established Wisconsin businesses will advance their digital capabilities by using technology products and services provided by the growing community of WI technology start-ups. These partnerships will benefit both parties – established businesses need new technology to remain competitive and get ahead in today’s evolving digital world, and start-ups need customers to grow and inform their product development. The efforts will also foster a collegial, supportive culture among local businesses, as the established companies can serve as mentors or even potential investors for start-ups, providing them with the necessary tools to grow their businesses and in turn help them become an integral part of Wisconsin’s knowledge economy.

I’m proud to have started my company SOLOMO, which provides location services to businesses, right here in Madison. The great thing about this city, and Wisconsin in general, is that in addition to its world-class academic institutions, it is home to some really fantastic people, ideas, and companies that are ripe for growth. The success of our burgeoning technology sector.

The question is how do we do this?  We need a more formal mechanism for connecting companies with common interests.  We are proposing facilitating this through the Wisconsin Partnership Pledge (link).  This pledge will outline the different levels of interaction that our established companies can have with entrepreneurs including mentoring, product testing and usage, collaborating on business challenges and even investment.  We will then connect companies with common interests to jumpstart the interaction!

The Wisconsin Technology Council is making strides in this area with the 2014 WI Tech Summit.  This is a GREAT start – but let’s make it bigger, formalize it, get everyone involved.  Sign up to take the Pledge – what can you do?