That a concept/product/service can get copied is a real risk. You cannot wish it away by assuming that your passion and enthusiasm will help you win the war. You have to manage that risk well.
There are two ways of dealing with the risk of getting copied or someone else doing something similar.
If your idea patentable, go ahead and protect it. As you will know, many large companies create a forest of patents around their core product patent. Hence, when you do a patent search you will also know if your concept is infringing on someone else’s patent. And if it is not, go ahead and protect yourself by patenting your product.
2) Build a value proposition that helps you win
As a startup, you have several advantages over a larger company. The ability to be nimble and respond quicker. The ability to devote much more attention to that client than a larger company possible can (the larger company can thrown more professionals at the client… but that cannot match the passion & commitment of a founder).
Other way to differentiate, and thereby create a preference even if there is competition, are pricing, brand personality, service levels, business models, etc.
Remember, in most markets, especially if the opportunity is large, there are likely to be many others who will take a shot at that market.
Go ahead. Be confident. But not over confident. Plan well. Plan thoroughly. Implement well. Be patient. Be creative (in everything expect in legal and accounting). Go win.
‘Proof of concept’ and ‘Minimum Viable Product’ are two very different things.
When testing the proof of concept, you could be testing not just the product itself but also a few other assumptions about the business around that product. I.e. Product testing is just one of the aspects that could be tested during a proof of concept test phase. Within this, a MVP is an early version of the product, finished enough to get a few early customers to try the product and give you some useful feedback which can be incorporated into the final product.
Below are a few things that are tested in a concept test stage/pilot phase:
- The concept – the power of the idea itself: Do the consumers/customers see the value proposition in what you offer?
- The business model: A business model is about ‘who will pay how much and to whom’. Each element of this should be tested in the pilot phase. i.e. are the consumers/customers seeing the value proposition as you meant it to be, how much are they willing to pay – is there price sensitivity, and if so, how much.
- The assumptions for your business case: As mentioned above, list all the possible assumptions you have made in your business plan and see if there is a way to validate those in your pilot. In a pilot, some of the operational outcomes may NOT be as per your plan. However, it is expected that in the initial phase your operations will be inefficient and that cost and operational efficiencies will improve as your business matures.
- Understanding operational challenges: Entrepreneurs often tend to underestimate the operational complexities and challenges of managing a business. While startups often manage operations with a limited number of people who are stretching themselves beyond practical limits, it is often not sustainable in the long run. A long-term business case cannot be made on the basis of the enthusiasm and give-it-all commitment of the founding team. A business case has to be based on what is practical and sustainable with an average set of people managing your larger teams.
- Testing processes and operational capabilities: Processes help organizations scale up. Processes are nothing but just a set of guidelines on managing activity and handling situations. Processes are usually centrally planned and locally implemented. Processes. They reduce the dependence of individual brilliance, and instill a discipline that results in operational efficiencies and consistency of experience. It also allows individuals to be clear on how a certain activity/situation is to be handled. The quality of processes can make or break an organization. Not only should processes be implemented, but they should also be measured and evaluated periodically to ensure that inefficiencies and redundancies are eliminated. In a startup, it is critical to define some processes, but yet be flexible to adjust processes quickly as soon as you see some processes becoming bottlenecks or inefficient. It is therefore important for startups to test these in the pilot phase.
(This post was my answer to a question on Quora)
Think of a VC firm as an observatory. A role in a VC firm gives you a vantage position to observe what works and what does not, and what real-world dynamics impact success and failures of businesses. Interacting with successful as well as struggling entrepreneurs provides you an opportunity to learn from other people’s experiences. Of course, being in a VC firm gives you an opportunity to understand what kind of businesses investors invest in, and more importantly, why.
All these opportunities give you a well-rounded view that is made up of different experiences and different perspectives.
Of course, one could argue that you could get this well-rounded view also by working in a consulting company. The difference however is that in a consulting company the discussions are largely about strategy and plans. In a VC firm, apart from strategy, it is also a lot about gut feel, individual insights & beliefs, AND MOST IMPORTANTLY, also about the most crucial factor for the success of a business – the on-ground implementation.
Most businesses fail not because the idea was not good. They fail because the founders made incorrect assumptions and/or were not able implement well in the marketplace.
Being at a VC firm can be a huge learning experience.
I must however also add that i have seen very, very, very few young professionals working in VC firms make appropriate use of this awesome opportunity. Most often they do not recognize the power of learning from other people’s experiences and tend to be clinical in their approach to challenges and opportunities. In the real world, entrepreneurs tend to celebrate successes and introspect on failures. Unfortunately I have rarely seen employees at VC firms spend time to introspect on failures. They just move on. They tend to spend a lot of time on analyzing why a particular model/concept/team was successful… and that is useful too. But is is much more useful and helpful for the future to understand why something did not work.
This is a summary of my talk at the Startup Weekend Next pre-accelerator program on the topic: Why customer discovery is critical to a venture
(For the purpose of this article I am using the word customer very broadly – for this article by customers I mean all entities that will either use, or pay for or influence the purchase of your product or service).
Wrong assumptions kill more companies than bad products.
I spent this weekend (15th and 16th of March 2014) at the first conference organized for creative entrepreneurs by The Coalition. Great initiative, awesome experience. Check out www.thecoalition.in.
Here’s a para from their website about what this initiative is about. The Coalition is a new platform to support creative entrepreneurs in India. Whether it’s music, film, design, fashion, arts, creative technology or something completely radical, The Coalition gets young creative thinkers together with the people, skills and money that can turn their passion into successful businesses – and connects them to the resources that can help their business grow.
Continue reading “My Notes from TC/1”