Paul is the Managing Partner of Angel Catalyst (www.angelcatalyst.com), his venture trying to radically innovate early stage investing. Paul is also the manager of the River Valley Investors angel group (www.rivervalleyinvestors.com) of Western Massachusetts.
In 2000 Paul co-founded All inPlay (www.allinplay.com), a company that creates software that allows the blind and fully sighted a way to play and interact as equals. While there Paul raised $250,000 from angel investors, served as Lead Designer of the company's games, secured strategic partnerships, and founded and maintained the All inPlay online community.
Outside of his work Paul serves as the Chairman of the UMass Amherst Entrepreneurship Initiative (www.umassei.org), an organization that equips students with the training and connections to become entrepreneurs.
While attending university Paul co-founded and helped lead the UMass Amherst Entrepreneurship Initiative, co-founded and lead the local Chapter of the Society of Physics Students, and was awarded the University of Massachusetts Amherst’s Excellence in Service and Alumni Leadership awards. Paul holds a BS in computational physics from the University (2000).
In February Sandy Wollman, Marty Isaac, and myself worked with the Angel Capital Association to evolve New England & New York’s syndication process to work for more angel groups. Angels from New England, New York, New Jersey, and Pennsylvania came together to test out our new approach to syndicating deals. Representatives from other syndication groups from as far as the west coast attended as well.
And it worked!
New England angels (who’ve been coming to the prior version of this structure for 10+ years) reported it was the highest quality dealflow they’d seen at a syndication event.
Non-New England angels said it was fast, efficient, and full of high-quality deals. They wanted to bring the event and deal-sharing design to their regions.
Overwhelmingly people loved our new approach to facilitate effective networking in zoom meeting.
Entrepreneurs said they received high quality connections to investors and their odds of securing funding were higher here than any other large group meeting they’d attended.
What’s next:
Collecting more data on efficacy – we need a few more weeks to see how many of those presenters did raise money thanks to the event.
Adding more groups to our process.
Improving our tech & processes to handle growing volume.
Experimenting with ways to create a “fast track” to allow entrepreneurs to move through the due diligence process much faster. We do this not by cutting out due diligence, but by leveraging the due diligence of other angels that have already invested.
Struggling to map your business model because you have lots of stakeholders / customer segments?
The Keep It Super Simple (KISS) Canvas takes your complex, multi-sided business model and turns it into an easy-to-understand story. Each row answers a key question about a stakeholder. Each column represents a stakeholder: payers, users, channel partners, employees, etc. One can easily turn a KISS Canvas into a pitch deck for investors by simply creating slides that mirror the content in each row.
Let’s look at an example for Magic Mops:
Here we have a company that makes ergonomic mops used by janitors who work for commercial cleaning companies who purchased the mops through a distributor. These stakeholders have very different pains and incentives. Magic Mops must have a viable business model for all three stakeholders or their company will fail.
The KISS Canvas, in one page, highlights:
Who each stake holder is and what motivates them
The value that must be delivered
The relationships needed to find, convert, & retain them
Key Stakeholders – Who do you serve? Each stakeholder gets their own column to keep their information clear.
Type – Stakeholders tend to fall into predictable categories: the one who pays you, the one who uses the product, the one who connects you to the customer, etc. It is important to know each type’s needs.
Persona – Describe the archetype that represents the key traits of this the stakeholder.
Pains – What problems do they have?
Value Proposition – What do you offer?
Benefits – What promises are you making to your customers?
Competitors – Who else is solving the problem?
Advantages – How are you superior at solving the problem?
Relationships – What kind of relationships will you have with each segment?
Find – How will you make people aware of your solution? This is often called marketing or promotion.
Convert – Once aware of you, what process will they go through to use/pay for your solution? This is often called sales.
Retain – Once someone is using your solution, how will you retain their loyalty?
Financials – How does the money (and value) flow?
Value Model – What value does each segment provide you in return for your product (money, attention, referrals, etc.)?
Pricing – How much do you charge?
CostStructure – What are the costs associated with serving this stakeholder?
Best Practices
At the start erase every assumption about a solution from your thinking so that you can (1st) expand the universe of the potential stakeholders, then (2nd) discover all the different stakeholders’ personas, in order to determine (3rd) their primary migraine-sized pains, and then (4th) bring to bear the benefits that your solution might/must provide.
Be clear & concise by staying within the size limit to the boxes.
Consider everything in a box as a hypothesis waiting to be validated by actual interactions with customers.
Don’t agonize. Filling in the canvas should take 30-90 minutes. Then go test the hypotheses with customers, update the canvas, and repeat as needed.
Indicate validated hypotheses by changing their background color to be a darker shade of its original color.
Why KISS instead of the BMC?
30-page business plans are great for established businesses and terrible for startups that need to iterate quickly. 15+ years ago the Business Model Canvas (BMC) changed everything by giving us a 1-pager to help quickly document and test the key hypothesis behind our business models. The BMC was a quantum leap forward.
However, my students and I often struggled with the structure of the canvas. While it was superior to a business plan it was relatively hard to read & use. You literally needed a map to show you how to read it – start here, jump to there, then jump down to here…
A second major pain point is that if you have multiple customer segments or stakeholders, you need to use different colored sticky notes. I found that trying to filter out the information visually was very difficult, as you can see from this actual canvas I developed for a startup accelerator I was running in 2015…
Get Your Own (free!)
If you would like to use the KISS Canvas, you may do so completely for free as they are licensed under creative commons :).
The KISS canvas was inspired by Alex Osterwalder’s The Business Model Canvas. My great thanks to the many people who have contributed to the KISS Canvas design over the years. Two who I need to particularly call out for their awesomeness are Rick Plaut and Kelly Minton.
“We’ve been world-class at what we do for decades. But the world has changed and we need to adapt. How do we come up with ideas that are out-of-the-box and have high potential?”
-PixelEdge Client
Lots of people think the answer is: lock the senior leadership in conference rooms for months of meetings, creating vast piles of scenarios and slide decks. No! No! No!
The method below provides leaders at large organizations with a low-risk means to come up with quality ideas in just one day! Some ideas go on to have profound impacts on their financials.
People:
Senior leadership
Staff with fresh experience, sometimes painful, from the field.
Tools:
Leverage the IdeaPAD to help you track everything you need on 1 page.
Process: Set aside 1 day to…
Build a PAD to launch your ideas from:
(P)urpose: It’s hard to get somewhere if we haven’t communicated where it is! Senior leadership should clearly define the Objective of innovation and summarize the company’s current Strategic Priorities.
(A)ssets: Great innovations always leverage your strengths. Document your company’s superpower, competitive advantages, and other assets.
(D)emand: No market demand? Then you have a hobby, not a viable business idea. Evidence of demand comes from your current top offerings, items stakeholders keep begging for, and items your competitors offer. Demand can also arise from large external drivers – like when COVID radically changed the employment landscape.
Ideate
Give everyone 10 minutes to review these items and generate a list of ideas. We’re talking post-it note level descriptions here, no paragraphs or novels, please!
Have everyone put their top ideas up for all to see.
Score:
Rate all the ideas against the first criteria listed on the IdeaPAD. This is when you give the ideas author a chance to explain the ideas a bit. I recommend you have everyone do their own independent and private scoring. Repeat the process for all criteria & ideas. Average up everyone’s scores to provide each idea a final score.
Discuss & Decide:
Take some time to discuss the top-scoring ideas and why they scored as they did. Take a moment to review why some of the low-scorers did poorly. Once complete, senior leadership should decide which ideas are worth further exploration.
Results
Viability identified ways to take their most successful program and scale it up 10x – which they did!
Pathlight realized a curriculum they had always delivered as a bespoke, one-off solution could become an online training program that could reach a national audience.
ERM identified multiple ideas that could have an existential impact on their business. One idea protecting them from new low-cost competitors and high-tech disrupters alike. Another idea has put them in the running to be #1 at helping the world’s largest companies reduce their carbon footprints.
Contact me to talk about our team helping you get the most out of this process.
Gratitude
I’d like to give a huge thank you to Kelly Minton, co-founder of my last startup, who helped evolve this tool from its earlier MAD iteration to something much more powerful. Also a shout of thanks to Stephen Brand for his original work that inspired this tool in the first place.
A central tenet of the Lean Startup is “pivot, persevere, or perish.” On June 1st, after five years of perseverance and pivoting, my partners and I wound down Launch413. With six months now past, it feels right to share what we’ve learned.
For those unfamiliar with it, Launch413 was a Post Accelerator that helped startup CEOs scale for sustained success by providing coaches with deep domain expertise. Our team consisted of angel investors, Fortune 500 executives, and exited CEOs from dozens of sectors. We developed a truly innovative model that we believe has tremendous potential. But after five years, we ran out of time. The purpose of this post is to open-source what we learned in the hopes that others can take the good bits and create something even better!
The Model
We provided each startup:
Board of Advisors that acted like a board of directors, holding the entrepreneurs to account. The board assisted entrepreneurs in developing strategic focus and then setting meaningful and ambitious goals.
Subject Matter Experts that were called in to help with targeted issues the entrepreneur and their board identified as key priorities.
A Venture Champion that met with the entrepreneurs weekly to help them stay on track with their plan, grow as leaders, and help recruit & coordinate support from other mentors.
Every month Mentors earned “points” for each role they played. We committed to work with the startups for years.
In return, startups agreed to provide us 5% of their growth in sales revenue until they’d paid us a total of $500k. We distributed those funds to the mentors based on how many points they earned.
What Went Right
Results: Quotes from our entrepreneurs:
“We would not have survived COVID without Launch413.”
“You are the reason we were able to raise our funding rounds before we ran out of runway.”
“We knew marketing and sales were major weaknesses for us, but had no cost-effective way to address it. Your team taught us how to do it, and then helped us recruit the talent to take over once we were ready to scale.”
“The community of mentors and fellow entrepreneurs were constantly supportive, making introductions and providing advice I could not have accessed on my own.”
Incentive Alignment: The model aligned everyone’s incentives to help the entrepreneurs build profitable, scalable businesses. No fights over valuation. No arguments over when to have an exit. No concerns about bringing in another mentor to help. And because we were at least threatening to pay the mentors, it created a much stronger level of commitment from them and from the entrepreneurs.
Focus: I’ve yet to meet the entrepreneur who failed because they were lazy. All the failures I know, including my own, came from working very hard, but on the wrong things. And so you run out of time. We provided our entrepreneurs and mentors simple tools to help identify what to focus on and ensure we stayed focused! Our top tools were Village Capital’s Viral Pathway (here is our adaptation of it) and our own Management Dashboard (template, training video).
Coordination: Our system of Venture Champions and light central support allowed our team of dozens of mentors, many of whom have never met in person because of COVID, to coordinate wonderfully to get our entrepreneurs the right help at the right time. There were lots of opportunities for us to do this even better and at a larger scale, but I know of no other organization that has done as well without also having a budget of tens of millions of dollars.
Network: The community of mentors and entrepreneurs formed was the best many of us have ever been a part of in terms of quality, collaboration, commitment, and just-plain-nice-people!
What Went Wrong
Lack of Dealflow
For all five years of our life, lack of dealflow was our biggest risk. We looked at a lot of sources and conducted over 100 customer discovery interviews with angel group leaders, accelerators, VCs, and all manner of other groups. Accelerators, Angels, and VCs liked the idea of us helping their portfolio companies in a 100% success-based, non-dilutive way. However, we were not solving a hair-on-fire problem for them, so they never became robust sources of dealflow.
We realized that almost all entrepreneurs insist on getting $ along with their advice. As we only provided advice (and didn’t really believe that the $$ should come first), that was killing our ability to secure dealflow. We looked into starting our own fund, but limited partners look for two things above all else when investing in fund managers: #1 the managers have done it before and #2 they have fantastic dealflow. Our team didn’t have either.
Economics Didn’t Work
When we first started Launch413, we estimated how much mentor labor would be required to help each company based on our past experience mentoring at nonprofit startup entrepreneurship organizations. Unfortunately, our experience proved to be different.. When we took into account the labor involved in our model, and that the amount we could make from startups was capped at $500k, and that we didn’t have access to robust sources of kick-ass startups… our mentors would be lucky to make the equivalent of $100/hr. That isn’t fair-market value, let-alone a risk-adjusted premium for getting paid “maybe possibly someday.” We were off by a factor of 10.
If it had been a factor of 2, we could have made it work. But a factor of 10 requires radical changes. The one thing that could most help would be to switch to an equity-based model as that might give enough upside to really help the math. But then we’d look like a venture fund that doesn’t write checks… so pretty hard to compete with VCs that do write checks.
And to be transparent: I ran out of time because I had to pay the bills! If I was independently wealthy, I could have worked purely on spec for the bright potential future of Launch413’s model. But I’m not, so it was time to find a reliable source of income.
Gratitude
In the six months since Launch413 closed, our community continues to help each other, our entrepreneurs continue to grow, and we all find ourselves better off for the journey.
I am filled with gratitude for what Launch413 created. It was a bold, beautiful idea absolutely worth trying. I am proud as hell of the impact we had on our entrepreneurs. I am humbled by the kindness and capabilities of the mentor community we built. I am enriched by the learning and connections we have all made together on this adventure.
I have special gratitude for:
Rick Plaut, my co-founder who’s calm presence and worldly wisdom was by my side for every rip and rise of the rollercoaster ride.
Jim Stanczak, who invested his incredible mind into every one of our experiments to make Launch413 scalable.
Our board of advisors: Ali Usman, Randy Krotowski, and Eddie Binder.
And the entrepreneurs and mentors that make up our community.
The angel groups of New England and New York joined forces to help startups get funded. Initial results: 2x as many startups are being seen by 2x as many investors, in 1/10th the time.
Entrepreneur Pain Points
You would think that the marginal effort to raise money from a second angel group is much lower. Won’t the second group take all the hard work you did from the first group and only need to ask a few more questions?
Sadly, no.
Instead, each angel group has their own subtly different questions and process. This makes the entrepreneur answer the same questions over and over. They have to create hours creating slightly different versions of documents. This costs the entrepreneurs precious time they need to run their ventures. This is bad for everyone!
Angel Investor Pain Points
All this back-and-forth isn’t valuable for angels either! The longer it takes us to assess a startup, the fewer quality investments we can make each year.
This problem crops up when we lead deals too. If a deal needs more money than we can put in, then there is a lot of work we have to do to help our entrepreneurs close the round. Knowing how hard that is discourages some groups from leading deals. Fewer people leading deals means few great deals getting done. That’s bad for investors, founders, and the economy.
Our Solution
The new Northeast Deal Sharing process addresses many of these issues.
Saves deal leads time by making it easy to share a deal with their peers in seconds.
Increases dealflow by providing angel leaders a curated list of vetted deals.
Save investors time by sharing only deals with a lead investor ready to share & coordinate due diligence.
Saves entrepreneurs time by accelerating connection to more investors via the curated list. We speed funding by setting new norms around sharing diligence.
We run it on simple tech (Google Sheets!) we built ourselves for no money.
Is it perfect? Hell no. There is a lot left to improve.
Is it a leap forward from what we had? Yes.
Results
Since switching to this system more deals are raising money from more investors and in less time.
Since New England and New York agreed to merge our processes and share dealflow, 2x as many startups are being seen by 2x as many investors, in 1/10th the time.
What’s Next
Right now we’re shaking out the merger of the New York and New England systems. A few months from now will add more deal sharing groups. Those groups can focus on geography, diversity, sector, etc. We also need to strengthen norms around being respectful of the entrepreneurs’ time.
Want in?
If your angel group is interested in participating, let me know.
Gratitude
My thanks to all the angel leaders, and the Angel Capital Association, for their hard work! A non-exhaustive list includes:
James Geshwiler for getting the angel leader of New England to start talking about this nearly 20 years ago!
George McQuilken for kicking us all in the butt and hosting the first New England regional syndication meeting back in ’06.
William Swiggart for writing up the first Angel Treaty that allowed us to comfortably start sharing due diligence in New England.
The great folks at Slidebean took the Lean Validation Board and gave it an update. Whereas the Business Model Canvas or the Lean Canvas map out your entire business model, this tool focuses only on the most critical things right now. It is a tool that helps you stay focused on the right priorities by putting them very clearly in your face.
When data is scant, scientists can greatly disagree. This video does a wonderful job of explaining why, and how the situation changes as data comes in. For those of us in innovation & entrepreneurship – this is our life! We are always starting in places of low data and high uncertainty, yet need to move forward. Lots of lessons to borrow from scientists here.
If you work in a business services company (consulting, accounting, legal, etc.) and are in charge of evaluating ideas for innovation, most of the tools you’ve heard of don’t work. The same is true if you are trying to quickly show junior staff value each of your service lines offers to your clients and to your firm. So I created the KISS (Keep It Super Simple) Canvas for Business Services.
Template (click to view Google Sheet version)
All of the key information you need to do a basic assessment of an idea’s potential, or to communicate your business model quickly, fits in about 500 words (one page). Some highlights:
For the Client (in Green)
What clients you’ll sell this to and if they represent an economically interesting opportunity.
How committed the initial clients are to embracing the innovation.
The value proposition for each key stakeholder at your Clients’ organizations.
For your company (in blue)
The value proposition to the key stakeholders in the business units (BUs)
The level of commitment from that business unit to champion this innovation.
Example (click to view Google Sheet version)
The Story It Tells
For the client: A set of current clients who build and run renewable energy facilities have a problem. If we can solve that problem, there are a much broader range of clients with similar problems, so there looks to be a sizable market opportunity. Clients’ senior managers spend too much time and capital when screening sites, hurting project IRR (internal rate of return). The innovation addresses this challenge by eliminating poor sites quickly and cheaply, increasing the IRR for each site. While there are lots of alternate ways to solve this problem, the proposed software+consultant solution gives clients the best of both worlds. They get better data quickly, and when there is a question that software can’t answer comes up, consultants with deep expertise are a click away.
For the consulting firm: One business unit is already committing staff to test this idea out, and if it works there are a lot of other business units that could benefit from it. Partners in the firm are losing work to competitors that can do it faster and cheaper. A software site screening tool tied to the firm’s consultants would get them in the door earlier on projects, increases margins at the early stages, and streamline and win more the intensive work on the projects later. The firm could use some of the existing software solution on the market, but doing so would not increase the productivity of their workforce and drive their margins.
What this Canvas Does Not Cover
This tool does not worry about 10,000 other things that matter, but are not critically important at the start. Marketing, sales, revenue models, and partnerships aren’t covered because most business services companies only want innovations that leverage their existing systems and partnerships.
This tool has proven to be effective at allowing junior staff to run initial screens of idea submissions. This saves senior people time to work on the most high-potential ideas.
Private Equity firms that own professional services businesses have a challenge with growing valuations. In a services-based business it is hard to increase revenue without increasing headcount. Margins shrink as hiring, training, and retaining talent becomes progressively more difficult. Meanwhile, all of the company’s intellectual property is locked in the heads of employees, meaning that when the employees leave the building, so do the company’s assets. These factors keep exit multiples for service businesses low, often ten times lower than comparably-sized software companies.
Digital Transformation allows you to increase exit multiples.
Launch customer-facing products that grow revenue and margins
Create a premium product that increases the value of core services
Offer new value to remain competitive or even leap ahead of competitors
Generate high-margin revenue with exit multiples ten times higher than service revenue
Digitally enable employees to increase productivity and performance
Embed the employees’ expertise in applications to ensure continuity
Make repetitive tasks faster and more accurate
Standardize and facilitate processes
But how? Some companies create innovation divisions… only to discover that the high-risk approach needed there is incompatible with the company’s failure-averse culture. Other companies buy into an enterprise platform just to learn they are costly, take years to generate results, and disrupt the core business.
The right answer for most services businesses is targeted digital solutions that solve pressing problems now. This approach lets you get wins on the board quickly, building momentum to effect larger and larger culture change to facilitate ever greater innovation & impact.
If you or someone you know is struggling with these issues, PixelEdge can help. Learn more.
Startups don’t die from laziness. They die from working really hard… on the wrong things.
You’ve launched your venture… now what? The financial lives of your team depends on you. When do you raise money? From who? On what terms? Is it time to hire or keep your burn low? Should you pivot to a new market or stay the course? The pressure to make the right decisions is intense. But you don’t have to do it alone. In this workshop you’ll learn and use practical tools that will give you confidence and guide you to better decisions as you build your company. This workshop is great for entrepreneurs who have generated revenue and are ready to expand their operations!
Do an initial VIRAL assessment of your company using Abaca’s tool. When you do it, pretend you are a cynical investor who demands extensive proof before they consider any milestone complete.
Write down what the lowest-scoring, incomplete milestones are for your venture. If you are willing and time allows, we’ll talk about those milestones and what it will take for you to achieve them during the workshop.
Your Instructor
Originally a computational physicist who spent many long nights at a particle accelerator, since 2000 Paul inspired thousands of people to innovate, help hundreds of startups launch, overseen investments in 50+ startups and held leadership positions in the national angel investor community.
Paul G. Silva 