Time to revisit royalty financing?

Royalty financing is a relatively new concept that offers an alternative to regular debt financing (loans and trade credit) and equity financing (venture capital and stock sales). In a royalty financing arrangement, a business receives a specific amount of money from an investor or group of investors. The money might be put toward launching a new product or expanding the company’s marketing efforts. In exchange, the investor receives a percentage of the company’s future revenues over a certain period of time, up to a specific amount.

-Source: Inc Magazine article

Some other interesting aspects of Royalty Financing – It doesn’t require the sale of the company. This means:

  • Entrepreneurs retain control
  • Investors start generating returns without needing a sale
  • The company is more likely to stay in the region it was born in (vs being merged & moved to the acquiring entity)

This flavor of capital is less risky than equity, but riskier than debt. As such, it may be an attractive option for angel groups outside of major tech hubs (such as my own) to explore.  In fact, we’re now actively looking to try out a few royalty deals. Stay tuned to see what we learn 🙂

Validating sales, marketing, and customer service hypotheses

When my students are working their way through a Lean Startup/Launchpad-style curriculum, the most important thing is to conduct great interviews. New folks smartly lean on a number of interview script templates (here are the ones my students use) to help them avoid many first-timer mistakes! However, the scripts I ran into tended to focus on customer pain & product validation – which is critical. However, I had a hard time finding scripts to help my students validate hypotheses around sales, marketing, and customer service (AKA Get/Keep/Grow in Lean Launchpad language).

So my fellow mentor Rick Plaut and I put this Get/Keep/Grow script together. Please feel free to share, use, and/or suggest improvements.

Introduction to the KISS Canvas

[This is part of a series on the KISS Canvas]

The KISS (Keep It Super Simple) Canvas (inspired by Alex Osterwalder’s Business Model Canvas) is a 1-page (or 4×3 foot poster) to help you quickly document (and then test) the key hypothesis behind your business model.

If you like to read, keep scrolling. For video lovers, click below!

OK, let’s dive in. It looks like this…

KISS Canvas-Easy2Read

The KISS canvas tells a story in the way entrepreneurs should pitch, with the most important elements first (on the left).

  • The Customer – Who do you serve?
    • Segments – Who are all the groups of people you will serve? Buyers, users, referrers, etc.
    • Pains – What problems do they have? Which are most important?
  • Value Proposition – What do you offer?
    • Features – How will you solve your customers problems?
    • Benefits – What promises are you making to your customers?
    • Competitive Advantages – Who are your competitors and how are you better at solving your customers’ Pains?
  • Marketing & Sales – What kind of relationships will you have with customers?
    • Get – How will you find and acquire customers?
    • Keep – How will you prove you kept your promises?
    • Grow – What new promises might you make?
  • Financial
    • Value Model – What value do customers provide you in return for your product?
    • Cost Structure –  What are the costs associated with running your venture?
  • Beard of Learning – When you disprove a hypothesis, move it to the bottom. If you’re using sticky notes they will eventually form chains and completely cover the bottom of your canvas. It kind of looks like your canvas grew a beard. Each sticky in that beard represents a hypothesis the student thought was true… and found out it was not! Thus the name my students gave it, the “Beard of Learning” :).

This Canvas is by no means a complete map but I have found it is the foundation of everything else that is to follow. To get a better feel…

Check out more KISS Canvas Content.

Nonprofit Innovation Accelerator 2.0

Innovation concept. Lightbulb in modern polygonal style with light effect

After running the Nonprofit Accelerator for just under a year now I’ve learned a few important things about my customers. They had the pains I thought they did, but they had other pains that were really important also, such as:

  • I don’t have any ideas to put into your accelerator OR…
  • I don’t know which of my ideas I should pursue OR….
  • Six months is a long time commitment for key team members when I don’t even know if the idea can work and yet…
  • At the end of the six months there is still a lot of polishing to do…

Meanwhile, I had greatly underappreciated just how much the nonprofits valued the sharks & mentors.

So, today I am proud to announce version 2.0 of the Nonprofit Accelerator that takes into account what my customers have taught me.  First of all, it splits the accelerator into parts:

Part 1: IdeaJam (1 half-day session)

Feeling light on innovative ideas? IdeaJam provides you a list of your organization’s super powers (AKA assets, skills, and connections) and their potential for unrestricted revenue.

Part 2: HitMaker (2 full-day sessions)

Unsure which of your ideas to enroll in the Accelerator? Hitmaker gives you a rank ordering of all your ideas based on their potential and risks.

Part 3: Customer Discovery (Every other week for 4 months)

Before committing the significant resources to turn your idea into a full-fledged program you need to know there plenty of people ready to pay for the thing you wish to sell! The Customer Discovery training provides the tools, mentoring, and introductions you need to secure the evidence.

Part 4: Funder-Ready (Every other week for 4 months)

People want what you have to offer, but how do you cost effectively make your offering and find your customers? Who do you need to add to your team? How will you fund it?

Pilot Design students graduate with a fleshed out business model, a plan for their pilot, and get to pitch to a panel of funders who, if impressed, will provide you seed funding to launch.

 

The next IdeaJam is coming up in July, so if you know any nonprofits that are making the creation of unrestricted revenue a priority, please feel free to share the updated website: www.UnrestrictedRevenue.com. Thanks!

HatTip to Birton Cowdan for the great name for the IdeaJam events!

 

Why Creating a Business Plan Is a ‘Waste of Time’

When I started exploring entrepreneurship in college, I was exposed to the education paradigm – write a business plan. I was a good student. I wrote 9 business plans in 9 months for my first startup.

It turns out, that was not the best way to spend my time. Yes, planning is essential. But it needs to be done in the right proportions. Less at the start. More as you mature.

Professor Carl Schramm recently wrote a carefully researched book called ‘Burn the Business Plan.’, listen / read to an interview about the book’s highlights here.

Hat tip to Jim Geissman.

Nonprofit Accelerator Shark Tank!

Shark Tank 1 Slides - NONA 1 - LI2.png

Friday was a big day for the students in my Nonprofit Accelerator‘s Spring Cohort. They spent from 9am to 3pm practicing and refining their pitches in preparation for the Shark Tank. My thanks to Kelly Minton, Jim Stanczak, and Bill Cole for helping me with the PitchCamp portion of the day!

At 3pm, the above-pictured group of amazing business and nonprofit leaders heard the pitches and gave #LovinglyCritical feedback. They filled in detailed scorecards so the students could see exactly where they were weak and strong. Several sharks offered to provide follow-up help and advice.  What a day!

My students did a great job upping their game and have learned a great deal about what they need to do to get their ideas ready for market. I can’t wait to see how they do at the next one in July!

My thanks to our Sharks!

  1. Bill Grinnell – Angel investor, business owner
  2. Katie Zobel – Community Foundation of Western MA
  3. Mary Walachy – Davis Foundation
  4. Murdoc Khaleghi – Serial entrepreneur & angel investor
  5. Nancy Urbschat – Business owner, active nonprofit board member
  6. Philip Silva – Angel investor, social entrepreneur
  7. Randy Krotowski – Retired top-5-in-world CIO (Chief Information Officer) for a fortune 10 company.
  8. Ray Berry – Entrepreneur and former CFO of the United Way
  9. Rick Plaut – Angel investor, entrepreneur, educator
  10. Stephen Brand – Social Entrepreneur and educator
  11. And bonus Shark Sarah Carlan – Family Foundation executive

Announcing the Spring Nonprofit Accelerator Cohort

I am proud to announce the Lean Innovation Institute‘s Spring 2018 Nonprofit Accelerator Cohort. Classes began back in March and, wow, the energy and dedication in the room is almost identical to what I saw in the VVM Startup Accelerator! These are leaders boldly seeking new ways to create sustainable, unrestricted revenue that furthers their missions. I am privileged to have such great students.

The organizations these students hail from are:

www.humanserviceforum.org

www.rise-at.com

www.rsi.org

www.thetechfoundry.org

www.viability.org

Yup, they have two teams in :).