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Amidst a global pandemic, business shutdowns and a four-month quarantine, summer 2020 sees Endeavor Miami running cohorts for its two growth acceleration programs: ScaleUp Program and EndeavorLAB. ScaleUp Program is a four-month initiative for companies making from $500K to $1.5M in annual revenues with the objective of preparing them for organized scale. EndeavorLAB, meanwhile, is a two-month program for businesses pre-revenue up to $500K, and its first cohort is for female entrepreneurs.
Together, the two programs are helping 19 Florida-based companies scale – furthering innovation, growth, and employment within the state. The programs share a common structure, starting with a rigorous selection process that includes applications, interviews and Pitch Night. Selected companies attend a Launch Event and soon after a Cohort Retreat, to build trust and transparency amongst participants. Prior to getting started with mentorship sessions and group modules – the bulk of the program’s content delivery – and wrapping up activities with a Demo Day, entrepreneurs take part in a Diagnostics, a session to identify the main drivers and challenges of each business, to be worked on for the duration of the program.
Leading the Diagnostics is Endeavor Entrepreneur and Endeavor Mentor Juan Damia, who has over 20 years of experience in Data Analytics, and has been nominated twice (2013 and 2016) as the “Most influential industry contributor” by the Digital Analytics Association. After selling multiple businesses and even writing two books, Juan decided to put together his industry knowledge and passion for entrepreneurship, to create Ninety Upsilon Sigma, a venture capital firm that employs technology to analyze the performance of start-ups using an in-house algorithm.
To pilot the Ninety Upsilon Sigma technology, Juan tailored his methodology to assess companies going through the Endeavor Miami programs. Three cohorts later, Juan has donated over 50 hours meeting with entrepreneurs and creating diagnostic reports. Given his major contribution to the Endeavor Miami programs, we invited Juan to share more about his work with Ninety Upsilon Sigma, its proprietary algorithm and collaboration with Endeavor Miami.
In 2010 I started providing mentorship sessions through Endeavor and other ventures, reaching a point of about 300 mentees in one year.
I quickly realized how the process of evaluating companies was too informal and subjective. The evaluation and derived feedback depended on several factors, such as your mood that day, how many other companies you had previously evaluated, what questions came to your mind at the moment, embedded prejudices about similar companies you had invested in the past (and probably did not work) among many other factors. Being an entrepreneur myself, I felt in debt with the entrepreneurs that I was working with.
In a mentorship session, you have on one side the entrepreneur that is putting his money and life into the company. On the other side, you have the mentor that has no commitment with the startup’s results. An average mentorship session takes 45 minutes to an hour, and the idea of someone telling the entrepreneur what to do, after an informal conversation, seemed to be unfair and overpromising.
So being the data person that I am, at some point I started working on a formal assessment process with 10 variables, which later turned to 25 and then to 210. With the variables in place, I started working with cohorts to test the technology (for about 8 years!). Finally, I used the data to play around with algorithms until I had a model with an acceptable level of risk.
Initially, I had no intention in turning this process into a company; I did it just to be better structured when helping entrepreneurs. At some point, however, I started talking with friends who work in venture firms about the model and they loved it. So, I turned the model into a SaaS.
Having a formal process to evaluate companies in a homogeneous way has several benefits:
I’ll mention two of the most frequent ones:
Becoming a product entrepreneur: A product entrepreneur is someone who has some expertise in an industry or business, finds a problem and creates a solution. The focus of a product entrepreneur is on creating the best possible product. This is a mistake that I personally committed, and it was one of the most expensive learnings I had throughout my entrepreneurial journey.
The reason is that at the very moment you launch a company, you should switch your mindset from a product to a business entrepreneur, with focus on business and not on product. If you have a good business, you will be able to have the best product. On the contrary, if you want to have the best product without a good business, you will have to focus all your energy towards getting capital to fund a product that nobody can assure that will be successful and more often than not, you will end up crashing your company.
Thinking that their main constraint is capital: No matter how big your company is, you will have budget constraints. I see the lack of capital as a “blessing”, as it will prevent you from becoming inefficient or making wrong decisions. Raising capital is something that is only recommended when you have proven scalability and profitability, in a context in which more capital can multiply what you already have. If you are in this situation, be as detailed as possible on how you will invest the money, and ideally, show proof of the expected results.
I had the opportunity to help several entrepreneurs to get the money they were looking for from their own clients (discounts for advanced payment, bulk discounts, high commissions to the intermediate channel, upselling/retention strategies, etc), and my experience has shown that making deals is a more effective way of getting capital. Of course, having a great deck could help you (or not) to raise money, but what is really unbeatable is having a solid (present or future) business. If you have something interesting (from the business standpoint), everybody will want to be a part of it.
We normally provide very tailor-made recommendations to Endeavor program participants, but I can mention some overall ideas:
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