Angel Investing

Kevin Learned: Why startup owner changed her business before it began

Director of the Venture College at Boise State and an experienced angel investorMay 21, 2014 

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Kevin Learned

STATESMAN FILE

Not everyone wants to start and build a business with investors, high growth and an exit. Some prefer to simply work for themselves. We call these businesses Main Street or Lifestyle businesses. Lean startup principles apply to starting a Main Street business as well as to scalable businesses attractive to angel investors.

Venture College entrepreneur Kelli Soll, a partner in Global Service Partnerships, is an example of the application of lean startup principles to a Main Street business. Kelli and her partner had a vision that they could somehow create a business in Idaho that would deliver value to people here and at the same time attack a literacy problem in Belize. They wanted to create a profit-making social venture that would enable them to earn a living while having an impact on this social problem in Belize. How do you do that?

They began by proposing service-learning trips to high school students. Kelli interviewed 90 high school students and educators. She learned they would love to go to Belize, but there was a problem. High school students don't have the money to go.

So she had to pivot. She had to find a customer for whom such a trip would provide value and who could and would pay.

She spent 50 hours talking with parents. She learned they might be willing to pay to send their children to Belize, but only if she could assure the parents their children would be safe. Pivot No. 2: She needed to redefine her relationship with her customers. This wasn't just a commercial transaction; she needed to develop a very personal relationship with her customers to gain their confidence.

Armed with this information, Kelli developed a "minimum viable product" or an MVP. An MVP has just enough features to see if the customer will in fact pay. She spent $20 to print brochures. This was her first cash investment. She invited those she had previously interviewed to meetings where she gave them her flyer that said she would be taking people to Belize in March 2014 and that the fee would be $3,000. Fifteen grandparents, parents, senior citizens and four teenagers signed up to go. Wow! That was $45,000 of presold revenue. Kelli's total investment to date, other than her time, had been $20.

Based upon this assurance that she had paying customers, Kelli then (and only then) went to Belize to set up the partners and activities such a trip requires. The end of the story is: The trip happened, Belizean children's lives were changed and 15 Americans had an amazing experience.

Kelli has now presold two more trips. That will result in a total of $135,000 of revenue in her six months of operations.

The lesson is that she did not first make a significant investment and build a product. She talked with potential customers and kept talking and changing her plan until she nailed down the customer segment, the value she would create and a revenue stream. Only then did she begin spending money on her product - the opposite of most entrepreneurs.

You can learn more about GSP at globalservicepartners.org.

kevinlearned@boisestate.edu, kevinlearned.blogspot.com, 426-5540

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