Building a great startup is hard. Really hard. It requires domain expertise, uncommon talent, great execution, perfect timing, and a little luck. Bearing all of this in mind, laying the right foundation could be what makes or breaks your venture. There are no clear-cut “right ways to build from scratch” but of course, there are processes that have been tried and proven to work, and the PSL process is one of them. During our Build session with T.A. McCann, he gave an outline of what the PSL process for launching new ventures looks like.
The first stage is ideation. In this stage, key aspects/decisions around the business brief (which includes segments like customer value proposition, competitive landscape, feature set, business model, etc) that answer questions like “How are we going to find and acquire customers”, “how might this product be monetized”, “what are the biggest issues of this company” is developed. A company only moves into the validation phase if one or more MD is excited about the idea and can imagine themselves on the board, catalyzing that idea.
This is the stage where tech feasibility is done. A technical feasibility study assesses the details of how you intend to deliver a product or service to customers. The materials, labor, transportation, where your business will be located, and the technology that will be necessary to bring all this together would be considered. In this stage also, the best investors, team outline, and landscape are also considered. Here you find out whether or not your company is truly viable with a focus on attaining the product-market fit you researched earlier.
At this point, PSL also does the due diligence involved in assessing if there is a fit between the Entrepreneur in Residence, the MD(s), and PSL.
The creation stage is the differentiation stage. A prototype of the product is made in this stage. Significant resources get put into the project and this is where the path toward turning the project into a company really kicks in. Hiring plans, key advantages, funding strategy(either angel investors or venture capital), and formation of the startup is also put in place.
The spinout stage is the stage where all the positioning, traction, productization, and recruiting talents that are needed for the startup to grow in the startup are done. Refinements are carried out and the decision to go to market is made here.
The operating team takes over here and the journey to the “founding day” begins.
In the scale-up stage, more capital is brought into the company (through VC funding), the company is scaling up and it begins to look and feel like a regular startup. This is also the stage where market leadership, predictable revenue, efficient scaling, team, and culture of the startup, and also industry leadership are analyzed. Predictable Revenue is a framework to create consistency year-over-year and provide business growth based on a formulaic process – not last-minute guessing. The team culture is also decided which is made up of the values, beliefs, attitudes, and behaviors shared by a team.
The lowest point on a cost curve at which a company can produce its product at a competitive price is also analyzed in this stage. At the efficient scaling point, the company can achieve the economies of scale necessary for it to compete effectively in its industry. Market leadership is the position of a company with the largest market share or highest profitability margin in a given market for goods and services. Market share may be measured by either the volume of goods sold or the value of those goods.
All of this is about people, whether it’s talking about people at the PSL level or the founders or investors, there is so much of the process that is about people and who the specific people are. Each studio is a reflection of who the people are, where they work and what they want to do. The “people factor” is critically important and it is important that this is nailed down from the beginning.