Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Five Degrees Off-Center – Often a Key to Success for Start-up Companies

When focusing on developing their businesses and business plans, many times entrepreneurs have a preconceived idea of their target primary market and customer base. This preconception more often than not “clouds” the strategic vision of the company and its technology, product or service offerings. In addition, it may result in the company not thinking “outside the box” in addressing potential market opportunities which could substantially increase the return on investment for the start-up company and its investors.

Due Diligence Expands Your Company’s Strategic Vision

As a way to expand a start-up company’s strategic vision, begin by doing a general market trends due diligence analysis. This requires the start-up company developing a given technology, product, or service offering to do their homework. To get a feel for the general market and the current and future trends, one must study the market(s) of interest. Doing the appropriate amount of market research will provide your start-up company with the overall basis in which to develop an understanding of the general market trends as well as the strategic opportunities that exist in markets. Generally, start-up companies in developing their market due diligence analysis should focus on three areas of research, including:

• Markets,

• Competitors, and

• End customers.

By focusing on these three areas, the entrepreneur can develop a quick assessment of the overall general market trends and the strategic, opportunistic market needs for a company’s technology, product, and service offerings. It also allows the entrepreneur to step back and separate themselves from their original preconceived notions, based on actual market research, to determine the appropriate path forward, which more often than not is different than their original plan. I refer to this as the “five degrees off center approach.” By doing your homework and now armed with real market due diligence, often entrepreneurs find new and/or hidden market opportunities that are more interesting and facilitate higher return on investment for their start-up company and their investors. Secondary and

Tertiary Markets May Provide More Market Success

Based on market due diligence, often newly identified secondary or tertiary markets can provide excellent opportunities for a start-up company and its technology, product or service offerings. These new market opportunities were not originally available to the entrepreneur and hence limited the overall company strategic focus and potential. By thoroughly evaluating these secondary and tertiary markets, the start-up company will now have the ability now substantially enhance its success in the market. These new market secondary and tertiary market opportunities can benefit the start-up company in the following ways:

• Provide new initial market entry points with substantially less risk,

• Provide a higher potential return on investment,

• Support an expanded customer base,

• Support multiple revenue streams,

• Provide a stronger competitive position in the market, and

• Substantially reduce the market risk for your investors.

All of these benefits will increase the start-up company’s potential for success in the market place. The Original

Primary Market – Still a Target

In many cases, after the market due diligence analysis process, the original primary market is still a market of interest for the start-up company and its technology, product or service offerings. But, with the new found market opportunities it may not make this original market opportunity the primary or initial market entry point. This does not diminish the need to address this original primary market, but it may prioritize the development of the associated features, functions, and capabilities of your initial technology, product or service offering. The end result will most likely be a change in the following:

• The market entry point,

• The target market application,

• The required product features, functions, and capabilities, and

• The target customers.

Reduces Investor Risk and Increases Chances of Funding

By doing the appropriate level of market due diligence, the start-up company now has a cohesive market entry plan and associated technology, product or services features, functions, and capabilities development plan. This plan more often than not is different than the original “preconceived” plan that was being considered before the entrepreneur did their market due diligence. In addition, this new plan may be only “five degrees off center” from the original plan, but it often provides for substantially less risk, higher return on investment and more cohesive approach to addressing the market with the start-up company’s technology, product or service offering. The end result is that this new plan substantially reduces investor risk and increases the potential of securing funding for the start-up company.

The information outlined in this article comes from my new book entitled “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up companies.”  Signed copies of this book are available at http://www.carlsbadpublishing.com.  The book is also avaiable at Amazon.com. Robert also provides business planning, and venture funding consulting services to start-up, small and mid-sized companies.

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March 9, 2009 - Posted by | Business Planning, Venture Capital

2 Comments »

  1. Love the title…five degrees off-center.

    We have found this to be true in our own family-owned winery business. When we opened our Tasting Room, we had a focus on a certain market for our product, but have found over the past year, when we “tweak” our marketing direction just slightly, we identify a slightly different market group that has big potential. As a winery, the industry statistics show women are the biggest purchasers of wine, so we targeted a lot of our activities toward a woman audience. However, we have found that women are also involved in non-profits and other social networking opportunities, so we expanded our marketing to introduce ourselves in that manner…as a great place to meet for socials, mixers and fund-raisers. It has been one of our best marketing tools, and put us into contact with a much wider audience.

    We also adhere to the concept of multiple revenue sources…the old adage “don’t put all your eggs in one basket” is definitely true!

    Great article…good advice for any business.

    Comment by Tammy Rimes | March 9, 2009 | Reply

  2. Great advice. From a recall perspective, your “Five degrees off center” is of great help to associate with the advice you have given.

    Thanks!

    Comment by Puru Gupta | March 10, 2009 | Reply


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