Entrepreneurs love to talk about their product. All of the technical intricacies and what was involved in getting it to this stage as well as what needs to be done to take it from idea to prototype. Very few of the pitches I hear really answer the question "Who's out there to buy it?" To an investor that is the key. I cover this in some previous posts but wanted to touch this again because it is so key.
John Huston of the Ohio TechAngels used to tell me that explaining the business case was simple. All investors really wanted to know was "Who is out there to buy the product?" and "How are you going to get them to buy it?" If you could answer that the business case would be clear. A lot of people in the early stages of business development miss that because they don't really understand the market and fall back on what they know, the product. When pitching investors you need to you really need to discuss they business case. Investors at the early stage will assume the technology does what you say it does or will do. You need to convince them that there is there is enough money to be made that the investor should spend more time with you investigating your opportunity. Investors are looking for a reason to say "no" initially because they don't have time to waste on a bad business. If you can't articulate your business value proposition, even if it is unproven in the market, you are dead on arrival.
To do this start with the first question..."Who is out there to buy the product?". I'm going to recommend two books that are MUST reads..."The Art of the Start" by Guy Kawasaki and "A Good Hard Kick in the Ass" by Rob Adams. Guy discusses the concept of the "Total Addressable Market". This is not the $100 billion market of everyone in the world that uses the internet as identified by the Gartner Group. It is the $100 million market of people that use the internet that have a particular problem that will buy your specific product to solve their problem. You need to get to that level. I have seen a resurgence of the "speed to market" businesses in the Web 2.0, social networking market. They feel that they can't accurately identify the market through traditional methods and the only way to really prove the market is to build a beta site, launch it and see how the market reacts. I know things move fast in this space but there is no reason not to do your homework. In Rob Adams book they do a great job discussing market research and how to really do it. I will agree that his process, while comprehensive, does take time and may be to long for some internet markets but you need to at least do some of the research and show some proof that there is somebody out there to buy your product before asking for money to build a beta site.
In conclusion, always be thinking who is out there that will buy my product when you are building your business. If you are coming up with ways to get to buyers that really have a problem that you can solve you will be in your way to success.
