PART 1: Carson describes CEG’s framework for start-ups
(EDITOR’S NOTE: The article that follows is the first in a two-part series describing the three-stage process that Tech 20/20’s Center for Entrepreneurial Growth uses to help start-ups in the Innovation Valley go from pre-revenue to growth.)
Shawn Carson is passionate about helping entrepreneurs be successful, and he brings that exuberance to his role as Director of Venture Development in Tech 20/20’s Center for Entrepreneurial Growth (CEG).
Since arriving at Tech 20/20 in 2005, Carson has spent a good deal of time focusing on developing coaching and mentoring experiences that enable entrepreneurs to move through a structured, but customized experience to take their start-ups from pre-revenue to hopefully growth.
In a recent interview with teknovation.biz, Carson says that he has “started using the word framework instead of process” to describe CEG’s activities. “A process indicates there are a specific set of repeatable steps that lead to a consistent product. Each startup is unique.”
“A framework is a compass, not a map,” he says. “It points in a direction.”
“We don’t use a cookie cutter approach,” he adds, explaining that there are different timelines, markets and opportunities for each CEG client. “No one size fits all. Things are moving too fast.”
Carson and his CEG colleagues have benchmarked a number of programs in other states and determined that the right framework is one that provides “just in time access to expertise.”
Describing himself as a philosophical guy, Carson explains that “entrepreneurs need to know what they need to know,” implying but not saying “when they need to know it.”
The CEG staged approach to entrepreneurial development has evolved from four stages to three. They are:
- Stage 1 (Pre-revenue) which is described as “an idea that is just in the formation stage.”
- Stage 2 (Business model) which is characterized by the company having a defined market opportunity and product definition.
- Stage 3 (Growth) which is determined when the company has a defined repeatable sales process, a management team in place, and revenue from sales as a cash flow source.
Carson says that about 40 companies are currently active CEG clients. Roughly one-half of them are in the pre-revenue stage, while 12 are in the business model phase, and eight are now considered growth companies.
He describes a typical Stage 1 company as one that has a concept but probably not a prototype. For those start-ups, it is important to “validate the market potential as early as possible.”
A key question that has to be answered is whether the market “(is) large enough to support a growth company to the point that it could raise funding capital” a threshold that he describes as several hundred million in sales.
If there is a market, Carson says it’s important “to get to a prototype as quickly as possible” and use the prototype to determine “one or two killer capabilities.” He adds that “you have to have an early first generation product in order to truly find out if customers will buy it.”
To underscore his point, Carson cited the Apple iPod. “It was not a perfect product, but they got it out there and captured market share,” he said, noting that Apple released six versions in five years as the company listened to customers and enhanced the product.
Carson explains that market research that the CEG recommends is “not the traditional market research.” Again to underscore his point, he quotes Knoxville entrepreneur Chuck Witkowski who reminds people that “customers will tell you what they want, but not what they will buy.”
For a company to progress to Stage 2, Carson says that should clearly have the prototype, have shown it a trade shows to secure feedback, talked to at least 25 potential customers to validate the market potential, and have started to pursue seed or angel investment.
“These are indicators of progress,” he explains.
NEXT IN THE CEG SERIES: Focus on the next two stages for companies.