Editor’s note: “The Angel Connection” is a regular feature in WRAL Local Tech Wire. LTW asked consultant Bill Warner to share advice for entrepreneurs seeking angel investors and/or venture capital investment. He is chairman of the Triangle Accredited Capital Forum, an angel investor network with over 100 members throughout the Southeast. The Angel Connection is published weekly.
RESEARCH TRIANGLE PARK – To interest investors you have to have a winning business, which means you must have a winning product or service. Well, DUH!! That’s pretty profound.
It’s a simple concept, but it’s quite hard to actually accomplish.
To have a winner, your business has to have a product or service that is focused on an attractive market segment, solve a well understood customer problem, have a financially compelling value proposition, be differentiated from your competitors, be effectively distributed, have excellent quality and be supported by outstanding customer service.
That’s a mouthful, but every single aspect of a winner has to be in place in order to succeed in today’s economy, which is now populated with very selective buyers who have a broad range of choices and not much money to pay for anything.
I. It all starts with the right target.
If you have done a complete analysis of your market and determined the market segments that have the most opportunity, then you will have an in-depth understanding of the market needs right down to the level of who is the buyer and what is their buying criteria. So, before you launch your product or service into the market, you better have a good understanding of the target you are shooting for. To have a winner, the market must have a large addressable opportunity, measured in revenue, in order for you to have a chance at business success as well as to attract the interest of an investor.
II. Understand the problem.
The product or service has to directly solve an important customer problem. What makes a problem important? The idea is that your product or service needs to solve a compelling problem that can be financially quantified as one of the top priority issues the customer has to deal with now. Customer’s purse strings are still very tight. They are being very selective and careful about what they buy. Only the most important issues will get attention. Lot’s of scrutiny will be placed on the purchase decision. In order to hit the target, you need to understand the customer’s problems as well as they understand them. If you don’t, you will lose to those who do!
III. Have a Match
The features and capabilities of your product or service have to directly solve the problem and match up to the buyer’s requirements in every way. If you have a detailed understanding of the problem, your solution will be easy to determine. Know how all the features and capabilities match up to the customer’s needs and be able to easily and effectively explain it. Most importantly, account for all the customer needs, including product features, sales support, distribution, fulfillment, professional services, support and maintenance. Having a match means that you have addressed all the customer’s needs from the time they are called as a prospect through the time they are a satisfied user of your product or service. So, it’s not simply a matter of having the best set of product features. It’s a matter of having a complete solution to the customer’s entire requirement.
Investors will be quite impressed if you can communicate the details and dynamics of your market segment and show that you know exactly who the buyer will be and what your company will do in order to reach them. Investors will still view your business as risky, but you will mitigate a lot of that risk with a solid understanding of the problem you are going to solve for your buyer and how it will be a no-brainer for them to by from you.
About the author: Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.
