Question

You are an advisor of a startup that just received an investment of $100,000. You expect the company is in the ‘valley of death’ stage of its life cycle. Provide them with high level advice on how they should use the capital and explain your reasoning.

Answer 1

1. Accumulation of resources: Plan beforehand and reduce the risk. That includes estimating the money required to get to the revenue stage, and saving money to cover costs. Costs of marketing, manufacturing and sales are high. Thus cost saving is necessary in surviving.

2. Search and then Commit to a major customer: Find a customer who would benefit greatly from getting your product first, and be willing to advance you the cost of development. The advantage to the customer is that he will have enough control to make sure it meets his requirements, and will get dedicated support. This will make this startup a credible name and does the work of "word of mouth" for the startup.

3.Joint venture with distributor or beneficiary: This firm can partner with a company such as a distributor or a supplier who would be willing to enter into long term contracts, and which would provide favorable prices and terms. Such venture could lower the cost of services thereby improve profitability, essential in the early years of a start-up.

4. Innovative marketing and Quality products: For customers to know about our product, innovative marketing is necessary in the early stages. That will give a boost top revenue generation. Also, marketing without quality product will be futile in the long run. Thus maintaining quality is very important.

5.Join a startup incubator. A startup incubator is an organization or a company which provides resources to nurture young companies, helping them to survive and grow during the growth period. These resources include a cash investment, as well as office space, and consulting.