This morning I sat through two pitches by two startups looking for funding. I won’t get into the details, but they both had clever ideas at their root. But while one company was attractive and poised for success, the other was mediocre and not getting much traction. Why was that? They both had clever ideas, no?
Over the years I’ve looked at a lot of business plans for Venture Funds. The first lesson that I learned was that cool ideas didn’t equal successful companies. While I would get all hot and bothered by a particularly elegant software solution, the VC’s I was consulting to preferred the plans that understood the market and the customers in it (and had a kick ass management team, natch).
The “good” company from this morning had a clever idea that was a clear solution to a customer problem. The mediocre company had a clever idea that didn’t really solve a specific customer problem. What accounted for this difference? Well, the “good” company spun out of a larger business, while the mediocre came out of a government funded not-for-profit.
The easy conclusion here is that business folks have the discipline of competition working for them, while NFP’s don’t. It’s true that I’ve seen companies that have no valid competitors flounder when it comes to a business plan, but that’s a disease that’s not restricted the the NFP realm.
No, instead this seemed to be a different ivory tower problem: lack of a customer. As a result their product definition was crap. Who would want this thing? Always start with the customer.
If your startup idea includes a software component, you should make sure that your software development practice also keeps the customer front and center. It may be tempting to start with architecture, to see if your software solution can “scale.” But if you get the customer wrong, you won’t need to scale.
That why with most software products that we develop, we start with user modeling. We do move on, eventually, to data modeling, process modeling, etc., etc., etc., but only after we’ve set the tone, so to speak, with user modeling — personas, user stories, task flows, etc. Everything that follows is then motivated by the customer.
So, before you spend a million dollars on that cool idea, validate it with some customers to see if they actually want it.