- What problem do you solve? I look at this as a 25-words-or-less plain english statement. I've spoken to a tremendous number of entrepreneurs who struggle to do this and it's not easy. I've created these statements in companies where I've worked and it takes time, thought, and a lot of testing to figure exactly what message gets your point across in a way that people can understand. Obviously, the other benefit is that the more precisely you define the problem, the easier it'll be to solve - hopefully!
- What's it cost to get a customer? In the late 1990's, I spent a lot of time working with companies like Expedia, E*TRADE, Fidelity, and other household names in e-commerce. Regardless of the industry, each successful e-commerce site came to the realization that their customer acquisition cost was a huge issue and one that needed to be monitored constantly. This point applies equally well to consumer facing sites as well as corporate oriented solution vendors.
- What do you need to believe in? In other words, if you're starting a social networking site, you need to believe that 1) people are essentially social animals that will usually look for ways to connect with each other; 2) you've identified a niche and created an experience that will actually attract and retain enough of an audience to make the venture pay off; 3) the sun will rise tomorrow morning, or whatever else is essential to success. Being able to state these beliefs helps set context and provide perspective, both of which lend themselves to understanding by a third party, like a VC.
- What are your dependencies? This is distinct from your beliefs, above - these are the things that have to happen to make your idea work. If you're pursuing a solar power idea, some examples might be 1) silicon based solar panels will continue to fall in price and rise in efficiency; 2) there's a finite supply of oil and over the long term its price will continue to rise; 3) because of construction lead times and political issues, nuclear power won't be a competitor any time soon. And so on - in any case, the point is to identify and clearly understand the things that have to exist for your business to succeed.
- What's the competitive environment? Well, this one's pretty obvious, assuming you know what business you're really in - see the first point above. Be sure to include substitutes and not just other competitors that happen to look just like you.
- What's the quality of the team? Putting together a business with your best friends from high school may not be such a great idea, unless they happen to be uncommonly well suited to the tasks they've been assigned. Otherwise, you're far better off reaching out to the best people you can find, which means talking to a lot of people you don't know, getting a glimpse of lot of things you don't know (through their eyes), and hopefully, finding people who are so smart and so talented they leave you thinking you'll have to work hard just to keep up with them. Inevitably, investors need to be convinced that the team in front of them can take their idea and execute on it better than anyone else around.
Whether you're experienced and have dealt with all of these issues or you're new and facing them for the first time, these points are worth bearing in mind as reminders or guides. Now go get 'em!