Two problems to test your Startup CEO and Investor Savvy.

This post is first in a series to highlight potential challenges as business owners, entrepreneurs, CEO that we could face, before it happens.

It is also a post to sharpen our critical thinking and problem solving skills. We are in the trenches solving internal or external problems and keeping our ears to the ground as to what may impact our business for the better or worse. Our problem solving skills need to be at "peak performance" and we need to develop filters to separate "signal from noise". We need to de-risk our startup or business risk while creating and capturing value. What mindsets and methods will help along the journey?

So here are two common challenges that we are likely to face either as a founder/business owner or investor.

Questions for CEO for Scenario #1 - Current Sales short of projections to profitability.

1. As a CEO what questions would you ask your team to initiate the problem solving process ?
2. How would you determine the root cause of your gap in revenue?

Scenario #1 : Current sales is short of projections to profitability and TAM

In scenario #2, you are a seed investor in a business that is highly recommended by your friends and family.  This company is "selling and scaling" and have achieved "product-market" fit, "traction", you were the keynote speaker at the launch party and you are thrilled when the first sales orders are in.  Now, the company is coming to you to lead the next round of investment.

Scenario #2 : How to solve this problem BEFORE it happens ?

Questions for an investor for Scenario #2

1. How would you determine if the business you have invested in, is not facing scenario #2?
2. What questions and proof would you ask of the founder/team? 
3. As a founder, what can you do, before you launch your startup to de-risk your investment of time and sweat and capital?

Scenario # 2 is quite common by the way.  Having a VC or Super Angel invest in your business is a huge accomplishment, however according to the WSJ about 30%-40% will likely encounter Scenario #2.

Here are some reasons that Founders share about why their startup failed and here is Paul Graham's take on some mistakes startups make . For inventors and hackers,  here are some links on lessons learned from  product launches from Harvard Business Review and some updated numbers on new product success rates .

So what are your solutions to Scenario #1, and scenario #2? 

 It could save, and help grow your next or existing business!!