By Stephen Day
Founders, what are you?
Is what you have a:
We get dozens of requests for funding for startups. But few founders have determined If their great new idea can really become a company.
Many researchers and founders have fallen in love with their idea and concept and assume that their new water filter or software is the basis for a brand-new company. But are they being realistic?
Recently, I reviewed a company that created a product to replace concrete walls and floors in construction. Was it revolutionary? No, not really. There are many companies already in the space. Does it possibly offer some improvements to designs already in place? Yes. Despite some traction in South America, moving into the US market would be very costly and time consuming.
Instead of needing several million in investment, plus hiring a management team and sales force, a deal could possibly be made to license the technology to existing companies and earn 3-7% on the sales. Why compete when you can partner?
Was this really a company? Or a technology? If they were manufacturing and selling to users, it would be a product. Having a product or a technology does not make a company by default. The market space, revenue model and cost of go-to-market should determine of whether to turn your product/technology into a company or find an alternative way to produce and sell.
Having a product or a technology does not make a company by default. The market space, revenue model and cost of go-to-market should determine of whether to turn your product/technology into a company or find an alternative way to produce and sell.
Almost every founder will come with a grand plan, at least in their mind. Here are four typical statements from startup founders:
1. We can build it better and cheaper.
2. We can sell it ourselves and make more money.
3. We can finance the whole operation, if only you give me several million dollars in direct investment.
Which Direction to Go?
Spend a few quiet hours and consider if you are capable of doing it all yourself. Licensing, teaming or outsourcing your sales and/or manufacturing, in many cases, puts a founder on a safer course for growth. You will make more money, with less stress AND be more attractive for investors.