My first experience of an entrepreneur was as a black-market gum candy vendor to my 1981 junior high classmates. The business model was simple, everyone chews gum, these people are all around me, and almost everyone has an extra dime in their pocket (a five pack of bubble gum cost a quarter including tax, charge a dime per piece…50% gross margin). This got to the point where I could clear $20.00 in a day –a lot of money for a seventh grader back in the day. I’ll blog more on this later–lots of funny little stories.
Now, fast-forward twenty years and several ventures later.
The success/failure of either being able to raise capital or the ultimate success of my ventures has been in direct correlation to how accurately the customer base has been defined and how ‘touchable’ these customers are. Both of the tenets were addressed in my youthful delinquency of gum running.
This sounds really basic and everyone knows that they have to do market research and talk to their customers. But, this is very difficult to do objectively. It is so easy to look up some numbers, wave your fingers over the keyboard, and believe the BS that you just wrote is gospel. I’ve fallen for this more times than I care to admit.
How do you know when your in this rut? Simple, people won’t fund you and/or you can’t generate sales.
I am going to share a couple of core things that I have done over the course of my last three ventures that has made this process self-directing, self-correcting, and almost a joy.
1) Figure out what you think your product or technology is, who would be your actual customer, and generally how you think your business model would work.
2) Envision a complete start to finish incarnation of this ‘thing’ and find some general supporting evidence that there is a market. Don’t get married to this, it’s only a starting point.
3) Find a Trade Show, presentation, or gathering where you can find many of the target customers. This can also just mean going out and talking with individuals.
4) Go there and talk to as many people as possible. Pitch everyone. If you’re getting funny looks keep adjusting your pitch until they ‘get it’ or you ‘get there’s’ instead.
5) Find at least one champion at an organization that would be a target customer, but also has clout within your industry to sway others. If you’ve polished your pitch quickly enough, you most likely will find one at what gathering you’re at.
6) Keep pitching to your champion and honing your message until it begins to generate traction both with your champion and also thorughout the rest of your audience.
7) Start submitting abstract proposals to present at other industry gatherings, create a corporate blog, generate supporting data to show your position as valid and publish it as a whitepaper.
8) Wash, rinse, repeat. Keep going around and around steps 3 through 7. This will create the market churn and you’ll find one contact feeding off of any small bit of positive news from the other…..soon this growth becomes somewhat organic.
9) Now, step back and look what you have: A cogent message for your market, a pitch that has turned into to definition of your product or service, and real customers to reach out, touch, AND QUANTIFY for your business planning pleasure.
Does this work, the simple answer is yes. Why do I know?
I spent several years working on three different business ideas pitching, researching, but never getting traction. I was on the brink of simply giving up and re-joining the workforce, when the following happened in each.
1) I had someone bring me a biotech idea….essentially they were wanting to compete with very low-margin established companies. We took the time to analyze the types of items being used in a typical genomics research lab by *gasp* talking with very well known experts. The direction of the company is 180 degrees from where he wanted to start it, but is fully funded with very healthy gross margins and precious few competitors (and customers begging for our product).
2) I came across some federally developed technology available for license that fit my background. I tried for 2 1/2 years to fund this and get a customer on board–ultimately I had believed the initial market research BS that I alone had written. Finally, after giving up at pursuing this, I happened to notice that there was trade show that served the market I would need to address a mere 4 hour drive away. I went there, sat in on a presentation by a leading industry expert on how the current state of technology would not allow the industry to move forward, and wondered the show floor asking questions that would tell me if I was on the right track without revealing what I was trying to do. I then approached the presenter and his company on the show room floor. When I told him what I had planned and what the technology could do, his jaw was literally on the floor. I now have a respected industry expert and also a multinational company as an industry partner. Moreover, I have a fully funded company that is about to wrap up a license and begin selling.
3) I have played around in high-end electronic data acquisition for years. Continually pitching, never gaining traction. I followed the above formula since May 2007, have major industry partners, demonstrated units at trade shows, and am presenting at this year’s Embedded Systems Conference. More importantly, even in this crappy market I have managed to raise some money and am close to raising more. Overnight success that took ten years.
How about partners/customers? Try NASA, Texas Instruments, Atmel, Altera, and other big names that I can’t drop at the moment.
I will continue to post back with more details on each of these start-ups.
What do you think? Too simple or was I just too thick to ‘get it’ sooner?