Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Assimilation of the Appropriate Research Data and Real World Input will Help Impress Potential Investors

Many times entrepreneurs believe that having a business “concept” or “idea” is enough to get their potential investors interested in investing in their start-up company.  Nothing can be further from the truth.  This may work for “friends and family” investors, but sophisticated investors often take three or more months to do their due diligence on potential investment opportunities to make sure that they are credible and have a good chance of being successful.  That is why smart entrepreneurs take their time to develop their business “concept” or “idea” in to a value-added business proposition that offers a long term sustainable competitive advantage in the market and the same time is scalable in an expedient time frame. To do this, entrepreneurs need to do their appropriate research, call real world customers, and talk to potential strategic partners.  Once this is complete, these same entrepreneurs need to assimilate this data and real world input into a value-added business proposition. By doing so, you will impress your investors and increase your chances of receiving funding.

Do Your Research

Doing research takes time and is hard work.  That is why most entrepreneurs try to skip this step in developing their “concept” or “idea” into a real business proposition.  The thing that most entrepreneurs do not really understand about doing research (market, competitor, etc.), is that it provides you, as an entrepreneur, with much more value-added information than you realize.  As you take the time to work through the research process and learn more about your target market(s), competitors, general trends, price points, etc., there comes a point where all of this data starts to make sense and at the same time provide invaluable insight.  That is, at a given point in your research process you begin to assimilate all of this data and then are able to:

  • Determine the strategic opportunistic needs of the market, 
  • Develop a value-added proposition for your start-up company’s technology, product or service offering, and
  • Develop a long term defensible and sustainable growth position over your competitors.

This assimilation process does not happen overnight.  It takes a significant amount of research, time, and effort, but in the long run will put you in a strong position when talking with your potential investors. As you now have real data to back up your value-added business proposition and at the same time, you can also substantiate your ability to enter a given market or markets to create a long term, differentiated, competitive position.

Call your Real World Customers

Once you have completed your research and created a business proposition that you believe is of significant value to your customer base, the next important step is to focus on calling your real world customers.  All of the research in the world is of little value unless it is verified with actual, real world customers.  This is where most entrepreneurs fail and it is what differentiates a good investment opportunity with a great investment opportunity in the eyes of your potential investors.  More often than not, many entrepreneurs believe they are smart individuals and that their technology, product or service offering will be accepted with open arms by their targeted customer base.  Nothing is further from the truth.  Even if you have a product offering that offers substantial cost savings or other significant advantages, there are other issues that will affect potential customers’ decisions in using your start-up company’s product offering.  This can include:

  • Integration time and effort,
  • Customer product planning schedules for new product offerings,
  • Completeness of the product offering,
  • Product rollout schedule and future product roadmaps.
  • Availability of important product features, functions and capabilities, and
  • Other.

Therefore, as an entrepreneur of a new technology, product or service offering, the most important thing you can do to differentiate your investment opportunity from the other start-up companies looking to secure investment monies is to call your real world customers!  These same customers will inform you of the important aspects of your “proposed” product offering that make sense and what things that do not make sense.  In addition, they more often than not will provide you with invaluable input that will often change your initial product focus or require you to prioritize necessary features and functions for your product offering. All in all, valuable customer input, from various potential customers, will allow you to assimilate this data and then create a much more attractive product offering for both your initial product offering and follow-on products outlined in your start-up  company’s product roadmap.

Talk to Potential Strategic Partners

Generally start-up companies, require strategic partners to become successful in the market. These strategic partners can come in many forms including:

  • Complementary technology partners,
  • Manufacturing partners,
  • Channel partners,
  • Marketing partners,
  • Others.

All of these potential strategic partners are not only valuable to your start-up company with regard to what they bring to the table in terms of their products, capabilities, technologies, etc., but they more often than not bring invaluable input in terms of their insights to helping you bring a successful technology, product or service offering to market.  Often these same potential strategic partners can provide invaluable insight to help facilitate both your near and long-term success in the market. This can include:

  • Determining your go to market strategies and tactics,
  • Defining your initial product offering’s features functions and capabilities,
  • Developing your initial rollout schedule and securing early revenue,
  • Identifying new market opportunities and revenue sources,
  • Lowering costs,
  • Other.

The insight, products, technologies and capabilities of these real world strategic partners can create significant value for your start-up company and its technology, product or service offerings. They may even cause you, as an entrepreneur to change direction and focus on new opportunities with much greater potential investment returns. Therefore, by talking to potential strategic partners early on in your start-up company’s development you can assimilate this information to create significant long-term value for your start-up company.

Interesting business “concepts” or “ideas” do not generally get sophisticated investors excited to the point that they are willing to invest in your start-up company. These same investors more often than not have a defined due diligence process that they need to go through to determine if your start-up company offers a business opportunity worth investing in.  By doing your research, calling your real world customers, and talking to potential strategic partners, you have ability to absorb a significant amount of data that can be invaluable to the near and long term success of your start-up company. In addition, assimilating this data and developing a value-added business proposition that provides a long term sustainable competitive position in the market will not only impress your potential investors, but it will help your start-up company secure funding with these same individuals.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to www.carlsbadpublishing.com.

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February 22, 2010 - Posted by | Venture Capital | , , , , ,

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