INpact has focused a great deal of effort building a product development roadmap. We all know that the phases and deliverables defined yield a formula for success. As we parted ways from the June INpact meeting, my friend and colleague, Pete Kissinger, posed an interesting question: “What happens when the entrepreneur doesn’t have funding to do all the things we’ve outlined in the roadmap?â€
Great question. I wish I had a great answer. I’ll try my best.
The entrepreneur needs to constantly focus on value. What tasks, activities, and deliverables are most important? Who are they most important to? What are the risks of not doing some tasks defined in the roadmap? It obviously depends on the audience. For example, investors might care about something different than regulatory bodies (e.g. FDA).
I’ll take a stand and state that proving the concept is always most critical. Proving the concept is more than just having a widget that works. There has to be a receptive market too. The proof provided depends on the stage of development and the risks involved. For example, an entrepreneur shouldn’t focus on proving the widget works in man without first doing some benchtop testing and without demonstrating the product is safe. Every phase of develop requires reiterating the proof of concept. Of course the further along in development, proving the concept becomes more rigorous.
I guess I still haven’t answered what a cash-strapped entrepreneur should focus on very well.
Build prototypes.
This is the most tangible way entrepreneurs have to demonstrate to others their idea solves a problem. If the entrepreneur convinces others that the product is worthy, funding will come more easily. Funding may not always be in the form of cash. Sometimes others may be willing to “invest†their time and expertise to help the entrepreneur further the product development.
Jon makes some good points, but I would offer a counterpoint. I would change “build prototypes” to “find a customer”. A widget no one wants to buy will not attract needed investment (with the possible exception of friends, family, & fools money). If customers are excited enough, you may find one or more than will help fund you. You also need customer input to build the right prototype. Once you have found your customer, then build away!
As we formalize the process of entrepreneurship we no doubt emphasize business plans and market research and other formalities that often derive from what large companies do when considering going in a new product direction. The old line entrepreneurs had confidence, justified or not. Most often it was not, but risk is a given. They would build something first and worry about details later. Tom Edison, Bill Cook, Hewlett and Packard would not at first spend $150,000 on a market study before spending $5,000 trying an idea out in the lab.
Most start ups have no money. See the 8th Edition of New Venture Creation by Jeff Timmons and Steve Spinelli on p. 57 which cites Ed Roberts book on Entrepreneurs in High Technology.
“A 1991 study revealed that of 110 start-ups researched, 77 had been launched with less with $50,000 or less; 46% were started with $10,000 or less as seed capital. Futher, the primary source of capital was overwhelmingly personal savings..
Bootlegging is time honored and sets up good frugal survival practices. Prototyping is important and does cost money, but talking to customers can often occur without a prototype.
@Andy – You are of course correct! Sometimes a “quick & dirty” prototype is a good way to flesh out finding a customer.
@Pete – To Andy’s point, Edison, Cook, & HP knew there were customers. Spending a few bucks in the lab helped them better communicate product ideas to these customers.
@Tom – Agreed! See Andy and Pete’s comments too!
Thanks, all, for chiming in!