Business Strategy · Product Launch Strategy

How do we best go to market with $20 million over 4 years in pre-launch sales?

Steve Scott Founder, AV Smartz

May 1st, 2015

We have a cart-before-the-horse AND an organic-vs-scale conundrum and could use advice.

We have developed a better, faster, cheaper, more transparent event sourcing and pricing system:

I think we need two things:

1. To assemble a team capable of structuring and closing a deal with partners who can support the execution of our plan.

2. Develop a more convincing case for why scale is required. That point seems to be getting lost on a few folks.


Pre-launch milestones

  • Self-funded the development of a patent-pending, disruptive technology
  • Extensible working prototype reducing workflow from 1-3 weeks down to seconds
  • The web-based app eliminates confusion, errors and redundancy
  • 3-year Agreement with a Fortune 100 Company
  • Proven concept used repeatedly with the above client and others

Post-launch

  • $20 million over four years.
  • Non-profit contributions through a sustainable, evergreen fund.
  • 10 million+ like-minded fans at launch
  • Capacity to process an order every 2-minutes
  • Published pricing and a retail distribution model
  • 50-80% lower pricing than industry norms with 30%+ margins
  • Transparency - Price match guarantee

One challenge we face is having built a race car engine and being told to drive it like a minivan. We need SCALE to perform and so far we’re sort of being told to grow organically, this accomplishes very little in an industry bigger than the NBA and NFL combined and for which there are no publicly traded companies.

We were recently advised by a potential investor to “get the first customer yourself” and we did with a Fortune 100 company to the tune of $300K with a bonus 3-year agreement. The investor now agrees that the model does in fact require scale, but he's not a dealmaker. We’re making progress, but could use ideas.

In fact, we don’t even require investment “in advance” - WE CAN SECURE UP TO $20 MILLION IN SALES OVER 4 YEARS BY JANUARY 2016 IF WE HAVE THE RESOURCES TO SUPPORT FULFILLMENT OF THE BUSINESS SOLD.

We’re close, but any advice on how to get across the goal line would be appreciated. 

You have an idea. Now it’s time to turn it into a brilliant and beautiful product. In this course, you’ll learn specialized tactics to study your user, create testable wireframes, and transform them into fully functioning features and products.

Chris Duncan Cofounder & CEO at Pixel Institute - Patient Centered Care Logistics

May 2nd, 2015

Steve
Concept sounds good, early traction is impressive, sales pipeline full. It sounds like the problem you  are having is convincing investors that you can execute with the team you have in place. This may be why you are hearing from them to start small, develop a MVP to prove the market and then scale up. Further it looks like you have been at this for awhile - this will also raise execution questions. Find an industry pro as co-founder/CEO and start building your adviser pool. And find a way to start small even if it is not profitable. Traction and sales will bring the investors.
Chirs

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

May 2nd, 2015

Why don't you factor the "business sold" or use revenue financing? If I understand it that is your real issue, based on having funding in place for $20M if you can solve this temporary roadblock in front of you today..

It is expensive..usually with an equivalent interest rate as high as the low 20s. Other option is to auction your receivables through some of the new web-based sites. 

Chris

John Katovich Founder: Cutting Edge Capital / Cutting Edge Counsel

May 2nd, 2015

Hi Steve, If you are going to have over 10m fans at launch, have you considered doing a Reg A, or Reg A plus and do a public raise? Reg A plus will allow you to raise up to $20m without audited financials, but still will require you to file in the states you raise. If you need to raise more, Reg A will allow up to $50m, and no state filings, but you must show audited financials. It does allow you to retain a lot more control over your mission by spreading the investors out to the 100% vs the 1%ers who typically will want to insert a lot of control so that they can have say about their exit. Best, John Katovich

Alex Eckelberry CEO at Meros.io

May 2nd, 2015

Being big to be big is a good idea, but unless you have a heck of a track record and can raise money on your name alone, you're going to need to do it organically or with seed money. 

Steve Scott Founder, AV Smartz

May 4th, 2015

Valid point Alex. And until very recently all I have been hearing is that ALL companies can launch and grow organically. So it is refreshing to hear your take.

Being advised to grow organically is likely more of a reflection on my inability to make the case for scale at start than anything else, as I felt it would have been somewhat obvious and therefore not need convincing.

My hope is that as we assemble a team and members of that team increase credibility they further support the case for scale at launch. Again, I appreciate your input.

Mohammed Ahmed Entreprenuer with a successful track record of startups and exits. CEO at Fore Support Services, LLC

May 1st, 2015

Steve, Thank you so much. Regards Mohammed

Steve Scott Founder, AV Smartz

May 4th, 2015

All good comments that provoked a lot of thought on my part. I appreciate each of you weighing in and offering your feedback.


Alex - "Being big to be big is a good idea." I think it begs the question; are there businesses that require scale or volume at launch in order to be successful. I know I could be wrong, but for me the answer is yes, particularly when the launch is designed to be a game-changer.


If we were to grow organically and reach $17 million annually we will have reached the median income for one of the more than 1200 companies in this industry - and yet won't be a blip on the radar.

We definitely require seed money and in fact will require a high-profile underwriter of sorts to fund and logistically support the ongoing sales and growth, post launch. We certainly expect the benefit provided to them to be equal to or greater than the benefit we receive. One idea that we've been asked to consider is an "acqui-hire," where a partner has first right of refusal to acquire the company based on preset criteria - so in effect they hire us to build a company that they will ultimately own. I think the idea has potential with the right partner(s).


Chris Duncan - As part of the need to assemble a team I would expect to fill the role of co-founder/CEO and to build an advisor/investor pool, so your comment is absolutely correct. We were asked to start small last year, so we did and after proving the concept we just feel that it is time to take the next steps of assembling a team to get to launch. I would expect that team to include management, advisors and investors.



I do realize the path I've taken of not giving away equity in the company to this point is unconventional, however I see great benefit for investors in our having gotten his far without having to "settle" for someone just based on the need to check a box for potential investors. Our current position allows advisors/investors to have input and influence on who is on the founding team and I view that as a strength or an asset. Conventional wisdom or traditional VC's generally see this as a sign of weakness and while we understand that we just view it differently.



John Katovich - Bullseye! Not only have we considered a "Reg A" but we developed a path forward on just such a funding scenario. Admittedly, I didn't know about the Reg A or Reg A+ - as they seem rather new, but I was aware of crowdfunding and have mapped out a plan to implement a campaign that I think you would find very exciting.


Chris Carruth - I think before we would make a decision to finance at rates as high as 20% we would opt to grow our current business to a few million and just continue enjoying the good life. We're fortunate in that this is a fallback position, however it comes with its' own set of challenges one of which is; someone is going to change this industry sooner rather than later (it is decades overdue) and I feel that given our technology and vision, we are in a better position than anyone to do so. - It is why I am an entrepreneur; to improve an industry, to improve millions of lives, to be big, sure, but big with a purpose. Having the capacity to process a thousand orders a day in an industry where the 800-pound gorilla is only capable of processing 25 orders a day - requires scale - in my opinion. In fact, even having the capacity of optimal transaction processing is only part of the equation. You still have to convince event planners who plan the 1.4 million annual events to assimilate to the new process. Convincing 30,000 of them to do so (100 a day) puts you at half-a-billion in revenues. Getting there organically - seems to be a stretch. Speed of execution just seems to be a relevant and logical aspect of the launch strategy.

Alex Eckelberry CEO at Meros.io

May 4th, 2015

Steve Scott, there are plenty of businesses that need to be big in order to grow big; think of a company in the telco infrastructure space, for example, where a lot has to be built to scale at start. However, the question is: can you raise the money? If you can, great. If it's a challenge, you're left with little option than to fund organically. The question answers itself.