Most Pre-Revenue Deals Should be Priced Equity Rounds, Not Convertible Debentures

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- Initial Investment Structures are Critical Building Blocks -

We all know time is money, but taking the wrong kind of money at the wrong time can be crippling. We think everyone needs to stop, take a deep breath, and think carefully about their role in the startup ecosystem.

Business fundamentals rest at the core of our beliefs. We counsel lots of early stage companies and, as a rule, we challenge ourselves to remain critical of the status quo with hard analyses to make us better in all we do. For this piece, we focus on how choosing between convertible debentures and priced equity rounds can affect investor confidence, company growth, and founder dilution.

JrPixels, the Startup Station, and their principals have been consulting, advising, investing in, and working with startups and growth companies for over twenty years. Each new deal goes through a similar process, and we begin each with some basic truths in mind. Good fundamentals build good businesses. Do things the right way the first time, and you can avoid a lot of costs and headaches in the future.

The logic of executing well on fundamentals is nowhere more prevalent than in the financing process. In our experience, the importance of financing as part of company building is often lost on founders because they don’t have the necessary expertise to understand it well.  Many founders think they don’t need it at such an early stage. That is a mistake. Because of the weight financing carries throughout the growth process, attempts to hack this process with quick, poorly structured deals may put your company at great risk. 

Nowhere do we see a need to sound the alarm more than with early funding rounds, specifically as it relates to the use of convertible debentures as a financing vehicle for pre-revenue companies. Historically, convertible debentures were not designed for pre-revenue companies. They were designed for revenue-generating companies to reduce their cost of debt while maintaining the tax benefits from interest payments. A call option (the convertible feature) on the company’s stock is a form of compensation to debt investors for the reduced coupon and is a way for them to participate in the upside when the company does well.

Generally, we recommend all pre-revenue companies create a pro forma financial model and do priced equity rounds. We did this with great success with Opkix, InPerson, Change My World Now, and others within the last year.  Unfortunately, we’ve seen an explosion of convertible notes in recent years, and we’re deeply concerned.

Our rationale in support of crafting a financial proforma for priced equity rounds is rooted in firm business strategy. “Why create financial projections when it is all a guess?” We hear this – All. The. Time. Like with the rest of the MVP process, many entrepreneurs have trouble reducing the uncertainty in which they operate to a limited set of variables within a structured model. Their mistake is how they define the objective they aim to accomplish.

The goal of financial projections is not to guess the future. That is not possible. Rather, the goal is to define the company’s business strategy for the next 2 - 5 years and create a mathematical representation of that strategy in the form of a financial model which may then be used as a core piece of your valuation argument and, of course, a natural guidepost for your priced equity rounds.

 

- The Unsaid Pitfalls of Convertible Debt -

The U.S. economy used to have a 66% failure rate for new businesses; now it’s ~ 90%.  It’s intellectually dishonest to suggest the reasons for this increase may be summarized in anything short of a doctoral thesis in Economics.  Nonetheless, this fact tells us a lot about the state of the startup ecosystem and provides a clear reason why priced equity rounds present healthier options than convertible debentures for pre-revenue companies. Also, because startup investment risk has undeniably risen, investors have additional incentive to utilize complex financial instruments to their advantage.

We’re not saying convertible debentures are a bad instrument. Instead, we’re saying convertible notes are both misunderstood and frequently misused by startup founders and investors. You may have read some “industry experts” say things like, “convertible debentures are designed not to be paid, but convert to equity.” Let’s be clear, that both obfuscates the nature of convertible notes and is woefully incorrect. Let’s review the classic features of convertible debt.

  1. They were designed for revenue-generating companies with the intention of giving them access to lower-cost debt.
  2. They are a complex debt-equity instrument with compounding interest + maturity date + conditions on conversion + preferences + a lot more if you’re not careful (like Full Ratchets, ‘lower of’ VWAPS, and onerous OIDs).
  3. The interest coupon is usually a cash payment to investors, made at regular intervals. While these payments may be deferred until the debt’s maturity, or converted to equity upon triggering events, these features are meant to be deal sweeteners not primary parts of the instrument.
  4. If the principal loan amount plus capitalized interest isn’t paid at regular intervals and doesn’t get converted, then the total amount (principal + capitalized interest) is due in full on the maturity date.
  5. A company must have a formal valuation prior to debt issuance to determine conversion terms.

The inherent complexity of these instruments is far greater than the complexity of priced equity rounds. Specifically, this complexity may pose a grave threat to your company’s continued operations by creating cash flow pressures (interest and principal payments) you may not be in the position to satisfy. They may also prevent your company from gaining future financing via a suddenly expanded capitalization table after a forced conversion.

We think it’s rational to say no one should enter into a contractual agreement they do not understand. After all, you could wind up with a fox guarding the hen house.

Why would it make sense to load up a pre-revenue company with debt they cannot repay, which creates a ticking time bomb of a capitalization table with the potential to decrease founder ownership to de minimis levels? We certainly can’t think of a good reason.

 

- Dubious Benefits of Convertible Debentures -

It’s faster. Perhaps, but as a result, you may give up a larger percentage of your company later at an unattractive price for a bit of saved time now.

It allows me to jam investors in quickly and provides more flexibility with regard to whether I’m an LLC or an Inc. So, you’re saying you don’t want the right investors, but instead want fast money that may not be right for your company? Additionally, do you mean to say that understanding the correct corporate structure for the needs of your business such that it supports good corporate governance and the further success of your company doesn’t matter?

Doing an early priced equity round is more expensive because it requires me to do more financial and legal work.  You’re right; it is more expensive. However, doing this work provides a more thorough view of your business model combined with a solid financial model so you can have realistic valuation discussions with potential investors. Doing this work will enable you to lay out concrete near-term goals for your company as well as a salient strategy to hit those targets. You will also be able to evaluate which human, infrastructure, and financial resources are required to launch and scale. Further, you’ll identify when you can expect to see revenue, break-even, and enjoy profits. What's more, this analysis will organically determine critical company milestones which guide the timing of financing.

It reduces transaction costs. Sure, but again, the cost savings are not enough to make up for the potential loss of equity and control of the business.

You see where we’re going with this? Long-term thinking is always a beneficial exercise, and long-term planning usually wins the day.

 

- Fundamentals Matter -

Here’s the deal: investing in companies is about aligning the economic interests of the company with those of investors. Priced equity rounds on pre-revenue companies support this basic tenet; convertible debentures, generally, do not.  Likewise, it follows that it’s best to value pre-revenue companies using their own business and financial fundamentals rather than an arbitrary valuation (or valuation cap) taken from a so-called comparable that qualifies as such only by virtue of it being in the same industry. That is especially true when those “comparables” have different business models,  products, and growth strategy, and therefore have nothing to do with the company being valued.

Founder marginalization is potentiated with convertible notes because the deal terms don’t include the right to invest in future rounds (Do you want a one-time investor?) as well as a set of information rights that spell out the rights and conveyances of all parties. Both features are typical of seed equity instruments, and when absent, may increase the likelihood of a host of problems, including 1.) Confusion about the precise nature and meaning of the verbiage outlining the legal rights conveyed by the convertible debenture agreement, 2.) An expanding investor pool at later financing rounds that may not agree with the legal language, and 3.) A litany of capitalization table issues that distribute decision-making power between increasing numbers of entities.

When convertible notes are misused, and conversion is set as a primary feature, there is a misalignment of incentives between investors and founders; not to mention pricing confusion in the marketplace. This applies especially to debentures without caps and discounts.  It goes without saying that founders want to move quickly to hit milestones and get to the next round at a maximum valuation they can justify. However, the debt holder has an economic incentive to get a lower price for the first priced equity round, so she is in a better position upon conversion or sale (remember, the debt is tied to the equity, so as the price goes down, investor share count goes up). Such misalignment tends not to exist with priced equity investments because each investor agrees to buy X shares for Y price, which is much cleaner and allows all parties to know what they own and when. Clarity is always good. 

As if all that wasn’t enough, convertible debentures remove founders from the immediate responsibility of carefully managing the capitalization table, which can be deadly. Mastering the math of how investments affect the capitalization table is essential for anyone growing a company and a categorical imperative if you’re raising money. We presume no one wants to drop the ball with such a critical piece of business.

To be fair, there is at least one reason to use a convertible debenture in a pre-revenue company, and that’s as a bridge loan to an appropriately valued predetermined equity financing round. In this case, when structured properly, they make sense because they remove conflicts of interest between insiders. 

Is it possible to structure convertible debt to have the same properties as a priced equity round? Yes. But, if you are going to do that, why not use the instrument you are trying to emulate, which is easier to understand and structure?

If your company is pre-revenue just do priced equity rounds. Don’t believe the hype. They’re not that hard to execute, and over the long-term, they better align the interests of founders and investors and help evaluate how successfully you are executing your strategy. There is no better tool for evincing clear proof points that will define and drive the need for a higher valuation.

 

- Conclusion -

Fundamentals First! Make it your motto.

Do your research, build your business strategy, create your financial model to reflect your company’s execution plan, and then make sure your company’s financial model and business model make sense. Ask yourself if you would invest in your company. Is the business case compelling enough? Is there enough long-term potential? How confident are you that you can hit your valuation benchmarks with all the strategic initiatives you intend to put in place?

After you complete these steps, you can create a meaningful business plan deck, executive summary, corporate profile, and a product outline for presentation to investors.

Do this well, and you radically increase your chances of finding the right investors that serve the growth needs of your company. Along the way, you’ll glean a much more thorough sense of how your business is geared and what levers you may pull to execute your company’s go-to-market strategy.  As a result, you will be much more likely to succeed because you’ll be prepared for changes that will invariably come your way after launch.

Don’t forget, strategic planning and execution are everything.

Cheers and good luck!

 

There may be cases when the use of convertible debentures is justified. Such instances include companies able to generate operating cash flow relatively early on and specifically before their debt matures. Note that we distinguish here between revenue and cash from operations, as the presence of revenue does not automatically equal profitability and does not always put your business in the position to start repaying debt.

Execution Success in a ‘Show Me’ Marketplace

Execution matters.  In fact, most of the time, it’s what matters most, which is why we titled our previous blog post “Execution is Everything”.   That post generated a lot of conversation, especially with our financing partners.  I think it’s fair to say, it piqued their interest.  The one question that stands out from the rest is, “What’s your prescription for building companies using an ‘execution-first’ outlook?”  So, we thought we’d answer that question as a follow-up to close out 2016 and provide you with some execution ideas to help you win in 2017.

First, a quick review of what we do.  Many of you may know our new operating model we call the Growth Engine, and some of you may have seen the recent article in Technical.ly Media D.C. about it as well, but for those new to this, here’s a quick recap.  We pivoted away from our original agency business model into what we call a Growth Engine, which put simply, is a turn-key solution for growth companies.  We provide all the necessary resources you need to grow and thrive in highly competitive markets, but I think what people are really interested in is that, when we partner with you, we take equity positions as payment for certain needs.  This pivot was the keystone to our success in 2016 and we believe it’s a big reason JrPixels was ranked as one of America’s Best Small Business by Entrepreneur Magazine.

Our starting place is this: If your company wants to raise money, be bought, merge with another company, or compete in a new vertical, there’s a very real need to package and present the company in ways that make fundamental market-driven sense.  Have a 10X non-linear value proposition?  Great!  You still have to show me the ‘Why’, the ‘How’, and the plan to achieve it.  We’re in a “Show Me” state. 

So, let’s be very clear, contrary to how things have been in the past, the basic standard for raising either initial (or new) money et al in today’s business climate is several orders of magnitude higher than it used to be.  KPMG’s 2016 Venture Pulse Report speaks directly to this issue.  Gone are the days of putting together a slick deck and raising millions of dollars … and before you say it, yes, it happens, but it’s happening less and less, and we can tell you with a high degree of certainty that this trend is on this uptick.  As my hedge fund buddy once told me, “The trend is your friend.  Properly prepare or you’ll get hurt”.

What does this mean for you?  It means to maximize your chances for success, leveraging our Growth Engine is a good place to start.  There’s no better example of this than the recent success Opkix has had with the closing of their fully subscribed Seed round.  This success speaks directly to the power of the Growth Engine platform and highlights how your company can go to market in a much more cohesive and efficient way that potentiates greater degrees of success with funding, user acquisition, revenue growth, or whatever your specific endpoints happen to be. 

The reason we created the Growth Engine is because executing well in today’s ultra-competitive marketplace means you must have, at least, these seven fundamentals completed, packaged, and correctly presented just to garner interest, much less to succeed.  And, in case it’s not obvious, each of these represents core Growth Engine platform offerings; albeit, not all of them.

1.     Financial Model – Proforma or Actuals. If proforma, they need to be created by a CFA.  If actuals, you’ll need at least two years of ‘historicals’, ideally CPA and GAAP audited.

2.     Business Model – At least a deck that synthesizes the financial model into an easily digestible format.

3.     Corporate Strategy – Structure, cap table, vision, mission, etc.

4.     Competitive Strategy – Sales, marketing, branding, social media, influencers, channel & partner development, demographics, etc.

5.     Design – UI/UX of apps, websites, social channels, etc.

6.     Development – Apps, websites, databases, security, servers, etc.

7.     Team – Executives, advisors, consultants, legal, etc.

So, let’s talk about execution and Opkix.  A year ago Shahin Amirpour walked into our office and pitched us his idea for a new mobile camera company.  Shahin is an experienced business person with nearly twenty years of success building businesses.  He heard about what we’re doing with the Growth Engine from a friend and decided to find out more, because, in his words, “It makes a lot of sense.”  After getting all the facts about the potential business model, and then gathering the appropriate market research and consumer data, we decided it made sense to partner with Shahin to build the camera company, named Native Optiks (D.B.A. Opkix), with its first product called, Opkix 1.

The first two points (Financial & Business Model) are by far the most important and we’ll tell you the same thing we told, Shahin, “Success here is 100% about your plan”.  Your plan must be airtight.  You must be able to answer all questions about your business model, financials, customers, cap table, competitive strategy, demographics, you name it – you need to know it.  Yes, the “problem”, “solution”, “team”, “competitive advantage”, and “milestones” matter, but they only matter vis-a-vis your business model, which should be driven by your financial model.  And this, folks, is where the rubber meets the proverbial road.  As stated before, execution is everything, but you cannot execute well without having the plan to do so, and you cannot plan properly without a firm understanding of what the financial model looks like both now and at scale.  I’ve said this before, but it bears repeating, if you don’t know your numbers, you don’t know your business.

It's not easy when your competitors are Snapchat.

It's not easy when your competitors are Snapchat.

Yes, I know what you’re thinking.  It’s too much work.  It’ll take too long.  I don’t know anything about it, etc.  Stop.  It.  The Opkix team thought the same thing, and to some degree they, and you, are correct.  Yet, it should be obvious that this is largely the point.  Did we put Opkix through the paces in this regard?  Yes.  Did it take 3 – 4 hour calls three times per week for two months with our CFA to complete the draft financial model?  Sure did.  Did we receive calls from the Opkix team complaining about how tough the process was?  Absolutely.  But, here’s what else happened, now the Opkix team can easily answer any and all questions from anyone, anytime, about their business model, and what’s more, they can tie those answers back to dynamic real world data-driven metrics on a line by line basis throughout their business and financial models.  This is clarity.  This is transparency into your process and a true understanding of “How” you will execute.  And, importantly, this is what it takes to ensure success.  This is the new standard.  Not coincidentally, this is the reason the current investors in Opkix are already committed to invest again in their $10.1M Series A round closing in 2017.

Now, by way of comparison, the rest of the bullet points (3 – 7) will seem fairly pedestrian but, don’t let that perception cloud your judgment.  You still have tons of work ahead of you.  Importantly, on number three, DO NOT ‘wing it’.  In fact, don’t wing anything.  Just because the steps seem to get easier post-financial model does not make them any less important or mean that you should take them any less seriously.  Specifically, for Opkix, we mapped out a detailed roadmap for their larger corporate vision and mission.  When you do this, they should be 1.) Fundamental to your core business, 2.) Reflect who you are as humans, and of course, 3.) Present the company with huge forward-looking challenges it cannot achieve anytime soon; sometimes these are called BHAGS.  Additionally, it’s important to recognize the role your formal corporate structure may play in your future growth because financing an LLC is not the same thing as financing an Inc. or an S-Corp, for instance.  As a basic point of reference, an Inc. is the better investment vehicle, but be sure to check with you attorney about what’s best based on your company’s needs.

Now, for the remaining points (branding, sales, integrated marketing, partnerships, design, and development), you’re going to let the financial model guide the basic framework because these require capital to perform.  Keep in mind, though, that you’ll still have lots of granular planning work to do around each of these disciplines, as well as the full body of design you’ll need to wrap around all of them.  For Opkix, we created strategic and tactical execution plans for each of these disciplines, and as per our own advice, tied them back to the financial model to guarantee we have the resources need to succeed.  Some of these plans you’ve no doubt begun to see role out via their Facebook, Twitter, YouTube, and Instagram channels.

In upcoming blogs for 2017, keep a look out for articles that dive deeper into things like corporate strategy execution phases, the basics of unit economics and why they matter, and if we can muster it, perhaps even some articles covering financing, financing vehicles, terms, conditions, and structures … stay tuned.

From all of us at JrPixels, and Opkix, please have a safe and joyous Holiday season and an amazing New Year.

Cheers!

 

Execution is Everything

A while back we started an agency, and arguably, we’ve done well.  We’ve worked with companies large and small, with budgets that vary at least as much, in sectors like FinTech, Consumer Products, SaaS, PaaS, Personal Transportation and Services, Social Listening, Gaming, and more

We’ve partnered with all kinds of people and organizations and our business continues to grow and receive market recognition, like our recent listing in Entrepreneur Magazine’s – Entrepreneur360 – Best Entrepreneurial Companies in America.  Along the way, we’ve built some great relationships and we’ve been a part of some amazing stories.  Of course, we’ve also seen our share of trials and tribulations, but the balance of successes/failures provides clear direction both for us and for you.

Regardless of budget, time and again, we found the same core problem as an outlier that’s repeated to the detriment of companies everywhere, and that’s – Execution! – Or, more aptly, a lack thereof. 

Fact 1: The future success of your company relies on growth.  Fact 2: You cannot grow your company in a meaningful way without first knowing what defines success.  Without good execution, neither of these happens.

Our clients often hear us say, “Execution is everything”, because truly, it is.  Clients wax on about “innovation”, yet in their zeal to innovate they fail to actually execute, which really means they’re wasting time and money.  Fact 3: If you have an awesome idea, but can’t execute a plan, you have nothing.  Plain.  And.  Simple.  Fact 4: If you’re not a good shepherd of time and money, you’ll never have more of either.  Be a good shepherd … plan, then execute.

In service of market demand, and to help companies like yours execute well, we recreated JrPixels in the form of what we call a ‘Growth Engine’.  The Growth Engine is designed with execution to defined endpoints in mind and represents our core value proposition.  We augmented our traditional service offerings to include a fully-integrated suite of services that represents the fundamentals of modern business.  Now, we’re a turn-key small business solution that places front and center the interests of investors and founders alike.

We successfully built this platform by relying on five core fundamentals.  You should rely on them too … 1.) Great People = Great Companies, 2.) Execution is Everything, 3.) You Can’t Do it Alone – Partners Matter, 4.) Mise En Place Your Business – Organized, Transparent, Repeatable Processes Win, and 5.) Success = Revenue, EBITDA, Market Share.

Define your endpoints and succeed.  Then, set new goals, define new endpoints, create an execution plan to achieve those endpoints, and then execute again.  Rinse and repeat.  Admittedly, this is easier said than done, but then again, this is why we exist.  We’re here to help if you need us. 

We love to chat about business, tech, music, photography, and family, so feel free to drop us a note anytime ... oh, and we use LinkedIn a lot too, so check us out there.

Survival: The Ultimate Metric of Success

It is ironic that survival is the ultimate metric of growth and success, yet lucid strategies for survival rarely come first in business planning. Some think simply doing business implies planning for survival, and they’re wrong. Generally, we tend to be optimists, and why not? Hope springs eternal and pessimism is never a good startup theme. But, in truth, if you’ve not planned not to fail, you probably will.

Yates and Achebe teach us “things fall apart”, the “center cannot hold”, and that eventually all good things “go away. These lessons tell us preparedness is survivals progenitor, but they also provide clearer paths on how to survive well.

Experience has taught me that founders have not properly acknowledged that we may be in a tighter funding environment. As someone who’s lived through several down markets, I think it’s fair to say, survival is everything. I’ve seen companies succeed almost entirely because their competitors did not. The ability to last is what mattered. Not better products. Not better people. Just survival, plain and simple.

Fact: You can’t count on additional funding rounds. Therefore, you must reach sustainable revenue as fast as possible. If you’re unable to do this – well that’s the survival part.

The nature of disruption is that one company’s growth often happens at the expense of another. Even if you have funding in place, or an investor who’s agreed to fund your next round, and even if you have cash on the books, failure to address questions of survival is dereliction of duty. Because, as mentioned earlier, things fall apart ... cash is burned, investors fail to invest, and down-rounds happen.

There are legitimate reasons for companies failing. Poor planning isn’t one of them. Failing for this reason is stupid. Planning is cool because it’s smart, and smart wins. Don’t be stupid. Be smart. Win.

So, how can you be smart and win? Ask hard questions. What’s our survival plan? Whats our competitive strategy vis-a-vis our revenue, EBITDA, and SG&A? How will we last through a lack of funding? How close are we to our perfect product/market fit? What assets exist that may help us survive?

Here are five survival essentials ... memorize them.

1.) Know your numbers and survive. Have professional financials made. A CFA/CPA should build your financials using realistic, well researched, metrics such that the defense of each number (spreadsheet- wide) is evident. I routinely hear from founders who say their investors told them not to worry about doing their financials. If you’re an investor telling people this – stop. It’s a disservice to the community. If you’re a founder hearing it, don’t listen and get your financials done anyway. If you don’t know your numbers, you don’t know your business! It’s that simple.

2.) Know what’s important and survive. Know your valuation and what matters. You must know the valuation, terms, and structure of your last raise. It’s possible you may have to accept a down-round to get funding. If you don’t know what’s important you may be ill-prepared to make good decisions. Forget about other companies, the terms they received, and the valuations they were given in markets less restrictive ... that time is waning ... and you must deal with what isor you’ll not survive.

3.) Get to EBITDA ASAP and survive. Learn it. Love it. Base hits win baseball games. Not only do they win baseball games, but along the way they smooth revenue and provide excellent opportunities to strengthen execution with a focus on margins. Do this and win. It’s worth noting that the opposite is also true. Choose wisely.

4.) Good Morals = Good Morale. Govern yourself accordingly and survive. One cannot build great organizations without it. But, you ask, “How can we have good morale if we’re letting people go?” Let’s be clear, you must make it to sustainable revenue to survive. If you dont optimize for this now you will not survive tightening markets. Not surviving = really low morale. I’ve had success being super honest with people. Respect them enough to tell them how it is. This lets them know it’s not their performance and gives them a good sense of your character. Do this well and people will work with you again. Do this poorly and you’ll earn bad reviews not just online, but other important places, like the hearts and minds of your colleagues.

5.) First Among Equals! Do this well and survive. The ancient Greeks had a saying, “Primus Inter Pares” (First Among Equals). It’s a term of earned respect and accomplishment that one cant get by leading from behind, but rather, only by being the tip of the spear. All decisions of survival must begin and end with you. Never ask someone to do what you’ve not done. When you make cuts, ensure they affect you first. Ensuring cuts affect you first is what separates a quality person from an average person, and represents the best definition of leadership. So, when cuts must be made, ensure they are deep, quick, and affect you first.

Remember, “Fortune favors the prepared mind” (Louis Pasteur). Good Luck! 

We Love Our Friends at AUGUST

I met the CEO of August, Sean Wing, from a random message he sent me on Facebook.  We had some common interests and friends and he thought we should meet.  After meeting at a local coffee shop, and chatting for about two hours, we were life-long friends.  I added him as a workout partner and we shared the roll of sounding board for one another; bouncing ideas and thoughts off each other about everything we could think of … life, his app, my apps, my camera company, and all the challenges you have to wade through to keep a product alive.

August recently launched its flagship product and this provided the direction and focus for its first major marketing and user acquisition push. 

The app is amazing.  It’s like Instagram, but with more depth and the ability to tell much richer stories … and it doesn't stop there.  The video uploads are unlimited (meaning you can watch and post a short film if you wish); you can follow your favorite stories, add them to your feed, and watch others grow their stories over time.  It’s a place for music creators to gain the fandom of an Instagram user because you can listen to full songs; something that can’t be done on competing platforms. 

JrPixels has volunteered its help in any way we’re needed.  Lately, we have been helping August run gorilla marketing campaigns, reaching over 30,000 new people a week.  

Check out my story on August: https://agst.co/s/7am4Z1AOjx

Also visit their site and download the app at www.agst.co


7 Things for App Launch Success

Mobile strategies are about deepening human connections and extending the brand-to-human experience in new and innovative ways.  Yet, consumers are a fickle bunch with very high expectations and the business of getting and keeping their attention has never been harder.  

Here are seven things to help the launch of your app be as successful as possible.  

  1. Clear Business Objectives.
    • Strategy drives policy.  Policy initiates process.  Process creates outputs.  Outputs build outcomes.  If you do this well, you win!  Game on.
    • Just in case the 1:1,000,000 happens, put a plan in place to allow for a quick ramp up of operations, production, marketing, etc.
  2. This one is critical – delay your launch until your product is truly ready, i.e. nobody wants a Windows Vista on their hands – yikes!
  3. Thoroughly test the product to ensure its differentiators are in fact meaningful to consumers/buyers/users, etc.
  4. New category/market segment?  Keep it simple.  Really simple!  If people don’t “get it”, they won’t use it.
  5. Understand your market.  Know your buyer persona(s).  Does an anti-persona exist?  What will people pay and why?  What does their buying journey really look like?
  6. Craft a “launch roadmap” position piece that details the processes, systems, financials, marketing, advertising, and operational workflow required.  If you want to succeed, NOT doing this is NOT optional.
  7. Always use case studies.  Few exceptions exist to these rules, so our advice is: When in doubt, write it out!

In service of the above, some questions to ask yourself are: 

  • Did you do your research?  No, really, actual research, i.e. not the usual suspects already involved with you company.  
  • Have you tested the product or service in closed groups or with a sample set of the public?  

If you haven’t completed everything listed above, then I will impart the words of my late grandfather, the Federal Judge, when he said, “Sandy, there’s nothing but air and opportunity standing in your way.  Get to it!”

Enjoy and good luck!

Cheers!

6 Mobile App Strategy First Principles

It is a truism that building a great app is difficult, but turning it into a profitable business can be even more challenging.  So, when we build your app, we like to follow these six first principles:

  1. Always start with an MVP – keep it simple and flexible – this enables a scalable model and keeps cost down.  We strongly recommend using agile development here.
  2. You MUST ensure data security across all devices, platforms, networks, and clouds.
  3. You must commit to moving the app from pretty to transactional, i.e. business model driven.
  4. Apps do “things”.  These things represent a process, which is ultimately a data set.  You must commit to the idea that your app is a data collection tool and therefore must represent a complete workflow.
  5. The focus should shift from user acquisition to monetization, continuous improvement, and engagement as the app matures.
  6. IT (yours, your client’s, potential partners, etc.) must be able to leverage the app from the cloud while retaining rich functionality and scale, or if it’s a 3rd party app and not necessarily going into the app store, ensure IT departments have all the same access and command and control capability. 

And, as always, remember the JrPixels mantra: 

Strategy drives policy.  Policy initiates process.  Process creates outputs.  Outputs build outcomes.  If you do this well, you win.  Game on!

Cheers and good luck!