Five Questions to test if your start-up will be successful?
I have a new job, or at least one more job to add to my time-slicing life. A few weeks ago, I began as an Executive-in-Residence at the Innovation Factory, the newest Ontario Ministry of Research and Innovation sponsored Regional Innovation Centre. In this role, I will be mentoring and advising early stage companies as they move from a conceptual idea to market research and testing, through product development and team building, to product launch and accelerating growth.
As I meet many of these great start-up companies, I advise them to look at their opportunity in the following way.
1. What business pain are you solving? The bigger the business pain, the more attention your solution will draw. There are other ways to describe this.
Howard Gwin calls this "Pull versus push market dynamics". He says"The buyer in the market has a business problem or revenue opportunity that propels them to go to market and investigate solutions." In contrast, if you are trying to make a market, then you are into evangelical or missionary sales, which are often long cycles and severely impact start-up cash flows.
Is your solution a Vitamin or a Medicine? When people are sick, they are in pain and it is easy to sell them a Medicine to make the pain and sickness to away. Compare that to selling them a Vitamin that will prevent illness. It is a harder sell.
2. What is the value of solving that business pain?
Value defines product price. It also creates urgency for the buyer to implement the solution.
3. How big is the market? How widespread is that business pain? Is it more prevalent in small companies or big companies? Is it specific to particular industries? Is it specific to departments within a company? Is it specific to some countries or is it global?
Answers to these questions will start to identify target markets and priorities. They will also start to size your total addressable market (TAM). TAM multiplied by Value (which determines Price) will determine the size of your opportunity.
4. Do you or does your product have unique IP? What is your secret sauce that can't be reproduced? How is it protected? Are these sustainable barriers to entry? This defines your competitive advantage and potential for a monopoly. Or, are you just a great idea that wins only if you are first to market? The former is an "IP play", the latter is an "execution play"
Try and name the second and third place competitors to Amazon, eBay, YouTube, Facebook, etc… You get the idea. There is a place for companies that have reproducible IP, but it is a massive execution play to get them to market in a dominant, competition crushing way. "If barriers are low, then momentum and adoption must be high to counter the competitive threat."
5. Who is your team? Have you a track record of doing it before? Are you coachable?
Most investors and advisors that I know make this a major factor in whether they get involved or not. Life is too short to try and coach a person or a team that won't listen.
So if you have an idea, have developed a product, or are building a company; stop what you are doing and step back and answer these questions. It will help you continue to move forward.