In this episode of Spend Culture Stories, Cynthia Del’Aria shares the challenges of launching a startup as a tech CEO, and how to determine the product-market fit for your organization and to validate an idea before seeking investment capital. Cynthia also shares her thoughts on making the right strategic calls on investment to truly build a sustainable business that lasts even during recessions.
Speakers: Cynthia Del’Aria, CEO/COO of Raika Technologies
Cynthia is the CEO & COO of Raika Technologies, a company that works with small business owners to turn their tech ideas into higher profits and higher margins for their business.
She is passionate about helping new app and tech entrepreneurs spend as little time and money as possible evaluating their idea, helping them get to a go-no-go decision quickly and efficiently.
Listen to the Episode Here:
How do you work with business owners to find that perfect product-market fit?
Do Not Get “Married” to Your Product Idea
I work with people in an eight-week series format. We start off the program by saying “get out of your head.” Entrepreneurs get stuck into focusing too much on what they think the product is, and there’s all these other thoughts and ideas swirling around in there that they can never focus. So if we get it all out on paper, you can focus and actually dig in “what is the product?”.
We then make sure that the thing that’s the MVP actually solves a real problem for real people, and that your solution resonates with those people so that they’re willing to spend money, change their habits (or ideally both) in order to have that problem get solved. And so we go through the whole world of customer validation and product validation. And how do you remove bias? Because a lot of times people think they’re talking to people and having really good discovery conversations, but they’re inserting their own hypotheses and their own ideas into the conversation in a way that draws out of the other person’s response to that, rather than asking questions in a way that draws out the other person. What are they really looking for and what would really be useful? So it’s a really different way of conducting the conversations.
Develop an MVP, and Test the Product Through Conversations With Real People
And I do quite a bit of training with people around how to have those conversations in a way that is authentic and it’s conversational, and they are actually getting real value out of having a conversation with somebody. And so once we’ve identified what really is the right MVP, then we look at how do we monetize it. After that, we then have the build versus buy conversation.
You know, you don’t always have to build custom software to get to your end goal for your MVP. And the great thing is, once you have traction, then you can get investors to come in and give you money to grow and build your own software and eventually replace whatever platform or whatever third party system you might be using with that new product. But most of the time, you know, people are looking for investment money really early when it’s just an idea. And the thing that that you’ll hear a lot is investors want to see traction.
And so I try and get people to traction as cheaply and quickly as possible so that then they can go after revenue, and then they can go after that investment capital and they give away a lot less of their companies when they actually show that they can make revenue with what they’re doing. This is really important as I want people to keep as much of their companies as they possibly can.
So how would you recommend startup founders to approach their fundraising journey? When do you think is a good time for them to start looking for investment?
Bootstrap as Much as Possible – Do Not Rely on Investors
Yeah, it’s a really great question. I would say as much as you can – bootstrap! You should get as creative as you have to, because you should wait as long as humanly possible before going after money. And the reason that I say that again is that not only do I want you to keep more of your company, but you’re going to make mistakes. You’re going to learn from those mistakes. If it’s you on the line, it’s a whole different conversation than the pressure and that sort of like the outward feeling of other people being on the line on your behalf. It changes the tenor of the things that you do. And you if you know that there’s an investor sitting out there, like waiting for you to produce, you might change the way that you take action or it might change the things that you do, and it may not be for the better.
And certainly, we want you to be doing things that are absolutely the right thing and absolutely the right timing for your company. And bootstrapping as much as you possibly can and will absolutely make it that much more likely that you’re going to get there, and you’re going to do it in a way that works for you.
Start With Family and Friends Before Going to VCs or Private Equity
When you do start going out for capital, starting with friends and family is really great. By family and friends, it means you start having conversations with people in your network that you know, who then know people who are putting fifty or one hundred thousand dollars into companies that are seed stage or angel stage.
Again, get creative because going to VCs, which is venture capital, can be extremely, extremely expensive. And the terms are never really very great, doubly so with private equity. Private equity guys are usually looking for a 10x return in five years and they never are interested in investing in a company where maybe you want to build something that’s an ongoing concern, where you’re earning money and it’s doing its thing and you’re paying out dividends. Those guys don’t want an ongoing concern. They want to flip, they want their money out and they want five to 10x return. They want in a very short period of time.
If you’re not looking for an exit, even more so, you’ve got to get creative and you’ve got to get strategic. I think what you’re doing will dictate when is the right time to get capital, and then how far down the rabbit hole of private equity in VCs. are you really willing to go?
So, yeah, that’s really good advice. So we kind of talked a little bit about getting the startup up and running and validating the market. So let’s say we passed the fundraising stage. Let’s say, OK, we got the angel investors on board or the friends and family on board. How do we make sure that startup founders are not spending the money the wrong way?
This is where having done all of your product-market fit and building your proforma beforehand will make sure that you don’t spend money in the wrong ways. Because in order to build your performa, you’re going to have to go through and say, “Ok, in order to get to the end of your one and launch, this is going to cost me $350k. Well, if you know that you don’t actually have $350k, you’re going to have to get pretty creative in order to make that performa work. The performer is the plan.
The best way to make sure that you spend money on only the things that really matter is to stick to the plan. A lot of times I often see founders who work with me for eight weeks and they do all the work and they have the plan, but the second they hire a developer, they start spending money on all these things that are nowhere in their plan. They always say “oh, well, we have money.” The money actually goes towards getting you to launch, like, don’t forget that. However you’ve laid out that plan, stick to it, because that’s the best way to make sure you lose as little money and time as possible by sticking to the plan.
How can you balance being agile, but also being fiscally responsible while sticking to your goals like what you mentioned?
Solve One Pain Point Extremely Well Before Investing Into a Roadmap
It’s a really good question. The thing that I usually tell people who ask a question like this is to remember that until you get to market, it should be one thing that you do exceptionally well that solves as painful a problem as possible for people. If you’re trying to change that up too much before you get to market, then you probably didn’t do a good enough product-market fit work and you probably need to go back to that.
I’m not so worried about the ability to be agile between the time when I have when I know that my plan is good and I get to market. It’s after you’re into the market that really matters. And the way that you all the right things is you don’t put anything into your roadmap, and you don’t work on anything that isn’t a priority for your users. So if if you think something’s really cool, I mean, that’s great. Like we all want to build cool stuff. But here’s the thing.
The CB Insights report that they launched in 2019 where they did a postmortem on a bunch of startups that failed that year (which was like a thousand startups) – what the report findings showed was that 42% percent of those startups failed because nobody wanted what they were building, and another reason was running out of cash.
Do Not Forget About Your Customer
That is still the case after launch. So let’s say you do all the right stuff. You get your product-market fit, you do all the right things, and then you get to launch and then you decide you’re going to build all your cool stuff, and you forget about your customer. You’re going to fail. So you got to keep going back to the customer and asking them: “what’s the next most painful thing I could solve for you?” or “what are the things surrounding the pain point that we’re solving now that would be more useful that we could add on?”
Because when you do it that way, not only are you definitely meeting the needs of the market, but also you have like-new revenue streams built-in because there may be some things that you add into the product they’re already paying for, but there may be some other things that are add ons or there are additional fees like upgrades or new plans. And that’s really what you’re looking for. The best way to do that and the best way to keep your customers and to keep them happy and to keep your growing is to ask them what they want – and that’s how you can find product market fit.
This interview is taken from an episode of the Spend Culture Stories podcast.
If you’re interested in hearing more stories from other forward-thinking executives, you may enjoy these Spend Culture episodes:
- Roy Stein from BabelBark on How to Fundraise and Use Your Startup Capital for Growth
- Suzanne Shiflet from Gym Launch on running a remote finance team
For more tips on remote work practices for accounting teams and CFOs, check out:
- 8 tips for running a successful virtual month-end close
- Digital tools for finance and operations teams
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