Startup America is a new government program that has the potential to change and improve our economy and small business growth in America. In this post, we share 5 Recommendations that we believe can help the program to be a success.
A brief overview of what Startup America promises to do:
- Expand access to capital for high-growth startups throughout the country;
- Expand entrepreneurship education and mentorship programs that empower more Americans not just to get a job, but to create jobs;
- Strengthen commercialization of the about $148 billion in annual federally-funded research and development, which can generate innovative startups and entirely new industries;
- Identify and remove unnecessary barriers to high-growth startups; and
- Expand collaborations between large companies and startups.
Startup America is a well-conceived initiative. We believe both public and private organizations need to come together in a coordinated fashion to actually deliver a program and value that can be understood by the entrepreneurial community. The country has experienced successful public examples including the SBA, Dept of Commerce, Dept of Energy, and other grant programs. In the private sector, working examples of entrepreneurial programs include: Kaufman, Case, TechStars, investor groups, and a myriad of foundations.
Add a “Revenue Acceleration Program” to the Partnership
After seeing and participating in a number of these programs, we hope and expect that this next generation of startup support and education includes the critical phase of the initial sales and helping young companies find customers for their products/services.
Mostly these programs focus on the creation of a business plan (document) and the development of the initial product with little attention or remaining funds for the actual sales process.
Mark Leslie, founder and CEO of Veritas, and one of the Stanford professors who developed the Sales Learning Curve would say that a team and product that takes too long in the initial build-out (as it always does in the development) ends up rushing and pushing and spending too much money with a rushed and ill-defined sales strategy.
Our advice and contribution to the organizing committees is to create the framework into two phases: initial build-out and initial sales. Investments, education and support should be in those two phases.
What is essential in Phase Two (when a product is ready) is the development of the vertical segmentation, customer profile refinement, sales structure, value proposition (to name a few) all of which need to be rolled out and evolve based on real market experience.
We are not alone in advocating this approach. In addition to Mark Leslie, many prominent and well-known academics and professionals express how critical the sales and market timing stages are to a young company.
Many people cite Geoffrey Moore’s Crossing the Chasm to explain how the market responds and adapts to a new product or service: Innovator, early adopter, early majority. Or the concepts of Infancy, Childhood, Adolescent, and Adult are used from Michael Masterson’s book: Ready, Fire Aim. We believe that early revenue traction can achieved for startups, if the proper resources are committed from Startup America.
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Here are five recommendations that Altus Alliance partners want to share with Startup America:
1. Expedite Disbursements: Once federal and state grants are awarded from government agencies, then please expedite the money disbursement to awarded venture start ups. Note: Now there are lags of many months to half a year– depending on the agency.
2. Restore Qualified Programs: Restore grant funding to programs that have were slashed due to non-strategic across the board budget cutting – especially for R&D grants, and PhD hires. Example: New Jersey Commission on Science and Technology – closed in 2010 with no replacement grant issuing entity.
3. Add Market Validation to R&D: Establish and increase market research and market validation related grants to enhance likelihood that funded R&D will more likely be commercialized in the marketplace. Currently there is too much emphasis on R&D and hardly any focus on commercialization. Perhaps the Department of Commerce could take the lead.
4. Establish Net Loss Carry Forward Tax Program: Encourage all states to establish or maintain Net Operating Loss Carry forward tax policies. As a tax policy example, we applaud the US Federal Government for its Qualifying Therapeutic Development Project Grants which were part of the Healthcare Reform Act of 2010.These grants were established to cover past operating losses of life sciences companies. We advocate creating regulation streamlining and cycle reduction for U.S. patents and for FDA approvals because they would have a positive effect to current bottlenecked ventures.
5. Recognize Sales Stages: Segment programs into pre-product and post-product development so that you create an ecosystem built on market realities. Product development, product creation happens on a different timeline than a Go-To-Market timeline and funding and other types of assistance should reflect this reality. Expand the channels for funding start ups and startup assistance – not just through traditional entities like universities, workforce state agencies and known players who may not leverage this spending in a way that truly impacts sales results, but instead create a challenge program open to those who know how to create new businesses and to reinvent the start-up ecosystem. Wired Bio-1 is an example of a program that was hamstrung and unable to make an impact with a grant from the United States Department of Labor Education and Training (USDOLETA).
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Overall, we believe the biggest issues that small companies face is moving from the idea, or initial product phase, to their first customers and sustainable growth. We want to encourage Startup America to accept and build on the idea that there is much more to growing a successful company (one that can generate profits from revenue, tax dollars and jobs) than just getting them started. In order to succeed, almost every startup needs help getting revenue traction with the right customers. To close, we’ll quote Peter Drucker – “The purpose of business is to create and keep a customer.” Let’s help today’s new startups do just that.