For Your Startup to Thrive, You Need to Build Value for More Than Just Customers
If you've ever attended a pitch contest or heard another entrepreneur discuss their plans for a new business, there's no doubt you've heard the phrase "value proposition" -- it’s one of those often overused entrepreneurial keywords.
Our friends at Wikipedia define a value proposition as "a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced."
I define value as something a bit more simple: creating enough incentive for someone to take action.
The phrase “take action” can mean a number of things. It could signify a customer executing a purchase or signing up for your email list. It could mean having an employee make the conscious decision to stay and grow with your company. Or it can even mean an investor deciding to invest.
Of course, you must have strong value for your customers or, well, you won’t have any. But beyond that, you must provide substantial value to multiple other parties involved in the life cycle of your business in order to attract and retain employees, partners and capital.
Let’s focus on two of the more important.
Treat employees like assets.
Yes, I realize that this is another one of those often-uttered business phrases, and yes, you can read about it in nearly any business book. However, it’s really important and often misunderstood at its most basic level. When you go out into the marketplace to attract top talent to your new venture, you are selling both yourself and the idea of your company’s future potential -- which includes growth, earnings and your intent to IPO then travel the world together on a private jet, right?
So what is the trigger that causes that person to say yes? It comes down to whether they recognize enough value, which in addition to the standard compensation and responsibility qualifications, may include whether they’ll have autonomy, if they feel like they have ownership in their role or position, if they are a good fit for the company and whether the company is a good fit for them. As they look at you, your company and existing team, its culture and both short- and long-term potential, the question becomes do those things collectively exceed their personal minimum of incentive for action?
It’s equally as important that you’ve created enough value within your company to retain those assets, while at the same time, understanding that each person has different ideas of what is valuable to them -- thus the importance of a cultural fit.
From the investor point of view.
A startup is like a giant puzzle -- more like one of those fantastically complicated 10,000-piece puzzles. From an investor standpoint, part of the value you need to have created, causing us to pull the trigger, comes from how well you’ve built out or executed on your puzzle.
Depending on the investor -- at least from an early-stage investor standpoint -- we’ll typically want to see an idea that represents a disruptive technology or product, substantial customer value, two or more founders, a product or the early makings of one, some amount of traction in your given market and your ability to build a solid team around you -- amongst a laundry list of other puzzle pieces that will vary from one investor to the next.
Once you’ve created enough value -- or incentive -- for the investor to take your business seriously, you’ll be in a much better position to raise the capital needed to take your business to the next level. Just make sure that you understand what is valuable to the investor that you’re speaking to, which can often be accomplished via open communication, and that you’re getting value from their investment that goes well beyond their bank acount.