Know your Minimum Winning Game for startup success
At XSeed Capital we are introduced to over 500+ new startup opportunities every year, and we directly meet or talk to 150–200 of these companies. In this context, I am sometimes asked what is the “biggest mistake” that a CEO or management team makes when pitching venture capitalists. While there are several that come to mind, I remain surprised at how frequently even experienced entrepreneurs struggle with a simple question:
“What are you going to accomplish with this round of financing?”
XSeed Capitalでは、500を超える新規スタートアップの案件が毎年持ち込まれ、我々はこれら企業のうち150から200と直接面談するか話をする。このような場合に、ベンチャー・キャピタルをピッチするとき、CEOや経営陣が犯す「最大の誤り」が何かについて、私は時に質問される。いくつか思いつくものはあるが、いかに経験豊富なアントレプレナーでも、次の単純な質問に頻繁に苦労することに私は今でも驚いている。
「次の資金調達の期間にあなたは何を達成するつもりですか」
In an unexpectedly large number of conversations and meetings, instead of hearing proposed measurable milestones, investors are given a “to do” list of activities from entrepreneurs: hire some engineers, launch the first product, get some revenue, do some marketing, etc.
In a world of staged funding rounds, an idea that my Stanford colleague, Robert Burgelman, and I wrote about in 2007 can provide entrepreneurs with a way to think about how they should contemplate what needs to be achieved with each infusion of capital and the size of the round they are raising: the Minimum Winning Game (MWG).
ステージドファンディングラウンドの世界では、スタンフォードで同僚のRobert Burgelmanと私が2007年に著書にしたアイデアはアントレプレナーが各資本注入で何を達成すべきか、そして調達すべき金額の大きさについて、どのような考えれば良いか方法論を提供できると考える。最低限勝つべきゲームである。
段階を踏んだ資金調達期間の世界では、私のスタンフォードの同僚、Robert Burgelman氏と私が2007年に著した考えによって、アントレプレナーが各資金注入内に達成する必要があるものと、各回で調達する規模をどのように熟考すべきかについて考える方法を得ることができる。それがMinimum Winning Game (MWG)である。
Originally, we described the Minimum Winning Game as:
“Defining the first major market opportunity that is limited enough to provide a clear target for technology and product development efforts in the short-to-medium term, and sufficiently large that successfully pursuing it provides a foundation for longterm corporate development.”
Note that this is very different than the Maximum Winning Game: the goal of achieving somewhere between $50 and $100s of millions of dollars in revenue within a fixed time period (often within 5–7 years).
「短期から中期的に、技術及び製品開発努力の明確な目標を提供するのに十分なほど限定され、成功裏にそれを追究することが長期的な企業の発展の基礎を提供するに十分なほど大きい最初の主要な市場機会を定義する」
これはMaximum Winning Gameとは非常に異なることに留意する必要がある。一定期間内（多くの場合5年から7年内）に、収益で5000万から1億米ドルの間のどこかを達成するという目標である。
In the context of a startup, the idea of the Minimum Winning Game can be applied to how entrepreneurs need to lay out the goals they hope to achieve with each new round of outside money. Since subsequent rounds of funding are often required for a startup, entrepreneurs want to mitigate various risks through each funding stage so that they can raise the next round of capital at a higher valuation each step of the way.
What are examples of good milestones? They could include the following:
* Achieving revenues of a certain level by a particular date
* Having a minimum number of paying customers at the end of a quarter
* Specific hires in key functions (including the executive team)
* Attaining a target growth rate at the end of the funding round
* Launch of a version of the product with specific features on a given date.
The various risk factors of a technology startup fall broadly into three buckets: technical risk (can it be built?), execution risk (can this team build it?), and market risk (will customers buy it?). Entrepreneurs need to focus on coming up with measurable milestones in each of these categories, and then build a budget to achieve those objectives. In one respect, this is the Minimum Winning Game for a startup in each round of funding: Accomplish enough product and market success so that subsequent investors will want to supply more capital to help grow the business to the next level of achievement.
If one thinks of each round of funding as a series of “base camps” that mountaineers use to reach the world’s highest mountains, each infusion of capital is like a subsequent base camp at a higher altitude: a place to add supplies and materials (headcount), to recalculate the risks of a climb (adjust strategy) and to prepare for the next step in the journey (mentally get ready for the subsequent set of challenges that a company will face). Each of these steps is a new Minimum Winning Game in the excursion of a new commercial enterprise.
So, when a VC asks an entrepreneur about what will be accomplished with the next round of funding, entrepreneurs would be well-served to think of what is the next Minimum Winning Game that their company needs to win in order to have a chance to achieve their goal, and what measurable milestones the team will use to keep score and know if they are winning the game in which they are playing.
Robert Siegel is a General Partner at XSeed Capital, and his investment areas include enterprise software, business operations where computational technology helps automate/improve company performance, and computing platforms that shape both business and consumer behaviors. He is currently on the faculty at the Stanford Graduate School of Business. Prior to XSeed, he served in upper management at GE Security, Pixim (acquired by Sony), Weave Innovations (acquired by Kodak), and Intel.
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