This year's Concept-to-Company event focused on the business formation of Cittio, a network management software company founded in 2001 and funded by Hummer Winblad last year. Ann Winblad moderated the panel, Jamie Lerner, Cittio's CEO served as the keynote speaker, and the panelists included Sandeep Johri, Oblix's founding CEO and currently HP Software's VP Strategy and Business Planning, Deborah Magid, IBM Software's Director of Strategy, and Elisabeth Rainge, IDC's Network Management analyst.
The evening's conversation centered on how start-ups best can enter mature markets dominated by incumbents. Network management is a $5+bn software market owned by IBM, HP, BMC, and CA. Jamie set out to answer how best to archetype an offering innovation, sales and delivery model, and marketing message that resonates with buyers in a market long controlled by larger vendors.
Jamie's advice centered on when to raise VC money, how to pick your VC partner, how to pitch VCs, how to sell against giants, and how to handle incumbents' FUD.
When To Raise VC Money
Jamie believes in bootstrapping companies. While I believe this is not a requirement, Jamie believes start-ups are best served by eliminating key market, customer, and product risks prior to soliciting venture firms. Jamie calls his strategy the "just add water approach;" walk in to meetings having validated a big market, shipped a solid product, sold paying customers, operated a well managed business, and hired a good team. He believes entrepreneurs should validate the following five hypotheses:
- Demand - select a large, established market to operate in and prove the innovation
- Product - develop a complete and working product
- Customers - referenceable accounts, good logos, and revenues
- Profitability - prove efficiency, discipline, and frugality
- Team - key players in place to grow
How to Pitch VCs
Jamie suggested the following structure for good pitches:
- 10 slides
- be crisp, clear, and articulate about the market need, offering innovation, and sales and delivery model
- 5 year GAAP pro formas