Entrepreneurs and investors used to rely on strictly qualitative/gut methods of assessing progress and deciding what their next steps should be.
In 2014 the great Steve Blank gave the startup world its first widely-respected quantitative assessment system: the Investment Readiness Level (IRL). A few years later Village Capital took the IRL to the next level, creating the Venture Investment and ReAdiness Level (VIRAL). It took Steve’s IRL and essentially added a second dimension, a set of 8 milestones for each IRL level. It is a fantastic tool to help highly scalable startups understand where they are at in terms of being ready to raise venture capital funding.
VIRAL is an excellent tool used by many. However, it didn’t work for my students. It puts nearly equal weight to all components of a business at every level of its development, whereas I find that in the early days almost all your attention should be on customer discovery, and later on it should be about product development, then on marketing, and so on. Also, while my students are building scalable businesses, few are building venture capital scale businesses, and many of the milestones in VIRAL weren’t quite right for us.
In a Nutshell
And so was born the KISS (Keep It Super Simple) Scorecard. At its most basic, it is a way to let a startup CEO/investor/mentor know what they should be focusing on, and it does so by helping them tell a story…
- Level 1: Idea – A founding team with passion and an idea to solve a large, important problem.
- Level 2: Market – Identified a viable market of customers who’s “hair is on fire.“
- Level 3: Value Proposition – Initial product that customers are thrilled with and is superior to the competition.
- Level 4: Relationship – Cost-effective methods to Find, Get & Keep customers.
- Level 5: Financials – Revenue model, cost structure, and unit economics are proven and profitable.
- Levels 6+: Scale 10x – Grown 10x, fixed what broke along the way, and remain profitable.
Like VIRAL, the KISS Scorecard has milestones for each level but more than half are on the specific aspect of the business it should most be focusing on. So for companies in Level 2: Market, most of the milestones have to do with understanding your market/customer discovery. For companies in Level 4: Relationship, most of the milestones are on finding cost effective marketing, sales, and retention strategies. Each level also has dedicated milestones for the few things startups always need to pay close attention to: Team and Fundraising
Also like VIRAL, KISS Scorecard’s right-hand side depicts what flavors of capital tend to be the best fit for companies given their level. Let’s take a look (click to enlarge).
How to Use the KISS Scorecard
- Get your own (free!) digital copy of the KISS Scorecard. If you like paper, go to the “print” tab and you can cross off milestones as you go. From here on out though we’ll assume you are using the “Digital” tab.
- Mark your current status. Go through the Scorecard and mark off each milestone you have completed. To do so just put an “a” in the tall, skinny cell to the left of each completed milestone. When you do so, you’ll notice the milestone will get a black background and the text will turn white. Your score (in the upper left corner of the document) will increase. Your score goes up by 1/9 for each completed milestone. Note that all the milestones are in columns D onwards, columns A-C should not be edited as they are labels, not milestones. Next go to the Log tab and in the row associated with the “a” assessment, put today’s date.
- Find your gaps & set your priorities. As the leader of a company one of your top jobs is to determine what few tasks of the infinite pile are the priority. The lowest-level uncompleted milestones on your Scorecard should generally be your top priority. If they aren’t, you should make sure you have a good reason.
- Repeat. Periodically (probably every 1-3 months) you should update your Scorecard and use it to guide your medium-term goal setting. Use a new letter for each assessment (“b” for the second, “c” for the third, and so on), leaving your old letters in place. Doing so gives you a grayscale bar graph showing the evolution of your startup over time. Be sure to update the “Log” tab each time so you have the dates of each assessment recorded. This is a great activity to do with your board of advisors. Asking them to “bless” you marking milestones as complete (even in a non-binding way) can create accountability most of us need.
Let’s walk through a fictitious example (picture of it below as well)
We can see the evolution of Magic Mops’ progress over time on this scorecard. The black cells with white text show them as they entered an accelerator with little more than idea (the “a” assessment). The progressively lighter gray “b” and “c” assessments followed each month thereafter as they applied what they learned in the accelerator. We can see they didn’t think much about fundraising until the end of the accelerator and otherwise were mostly adding one layer of knowledge at a time. Then, after graduation, they go to autopilot.
Fast forward a year. Magic Mops’s product was in the market and generating a few hundred thousand dollars in revenue. Wahoo! The CEO was spending most of her time on ramping up sales & marketing efforts. She runs into her old KISS Scorecard from the accelerator and realizes she hasn’t updated it in all this time. At her next board meeting she asks everyone to help update the scorecard. The conversation is illuminating.
First of all, her score is listed as 3.0, not the level 5 or 6 she expected given the her recent sales successes. This gives her and the board pause. So she looks more closely…
Yes, she has 1 milestone in level 6 and one in level 5 crossed off. A few bigger customers took a chance on her, so she felt pretty confident. But, there is a huge problem. She’s spending time on high level milestones when the very foundation that work is built upon is unsound. Critically, she is missing:
- Milestone [2.4] “Our initial target customers love the product, pay for it, and keep using it” – People have ordered, but there have not yet been any reorders.
- Milestone [2.5] “Customers validated our solution is superior to competition” – While the janitorial staff using the mops love them, there is zero evidence from the paying customers that the product is superior for them.
- And all the Level 4 milestones are incomplete. Many things have been tried, some successes came in, but nothing that is scalable or repeatable or even consistently measureable.
Scaling up right now would be begging for the #1 cause of startup death, premature scaling. Instead, she needs to put almost all of her attention into milestones 2.4 and 2.5. Only after she has proof that those milestones are completed can she start working on sales & marketing with confidence. Her board helped her reorganize her strategy and ToDo lists to focus obsessively on these milestones.
She just dodged a company-killing mistake.
Hopefully, so can you.