Arbus 200 - Chapter 2

Question 1

Mythical start-up process step 1:

Answer 1

Myth: You need to have an amazing idea
truth: venture capitalists would rather have a great team and a mid idea, but not the other way around

Question 2

Mythical start-up process step 2:

Answer 2

myth: you need a detailed business plan
truth: usually outdated by the time they are complete, can be negative and cause startups to miss important information happening around them and take a long time to create

Question 3

Iterative Execution

Answer 3

Startups focus on iterative execution instead of full business plan to
- move quickly into market with their idea
- find a first customer to test and evolve their offering
- adapt and pivot based on market feedback

Question 4

what is a pivot

Answer 4

when start-ups take a entirely new direction for its product or service based on customer feedback

Question 5

Mythical Startup process step 3:

Answer 5

myth: you need to go out and get financing immediately
fact: focus on engaging with potiental customers and establishing real traction to validate their concept
- financing only comes to start-ups when they have traction
- banks are not a good source for funding

Question 6

name all three steps of the mythical start-up process

Answer 6

1. come up with a great idea
2. write a detailed business plan
3. Go out and get financing

Question 7

2 categories of early stage financing

Answer 7

1. pre-seed stage
2. the seed stage

Question 8

describe the pre-seed stage

Answer 8

first step of financing and starts with the minimum viable product and starting to identify potiental early customers. (includes pitch competitions like Dragon’s Den to secure financing)
- most funding from family/friends, founders and accelerators

Question 9

key players in pre-seed funding

Answer 9

• founders
  -angel investors
  -friends and family
  -incubators and accelerators

Question 10

what is a founder

Answer 10

visionary individuals who plan the startup, create a business plan and try to make their vision reality

Question 11

what is a angel investor

Answer 11

high net worth person who invests personal funds into startups in exchange for equity (shark tank, dragons den etc.)

Question 12

what are incubators and accelerators

Answer 12

programs that provide mentorship, resources and funding to early startups in exchnage for equity

Question 13

what is the seed stage

Answer 13

• second stage of financing, you have some revenue coming in
• refine the value proposition (narrow down target audience) and build sustainable business model
• after seed stage, company can focus on scaling the business

Question 14

key players in seed funding

Answer 14

• angel investors
• micro venture capitalists
• institutional investors

Question 15

target runway

Answer 15

how long your funding will last you

Question 16

startup failure rates

Answer 16

• 90% of startups fail
• average failure rate for year 1 is 10%
• 70% of businesses fail years 2-5

Question 17

what is a pitch?

Answer 17

brief presentation that “pitches” investors on a start-up