If You Have A Great Business Idea, Who Ya Gonna Call? Hint: Not A VC
If you have the next billion dollar start-up business idea that is going to change, even revolutionise, an industry, what is your next step?
If you have the next billion dollar start-up business idea that is going to change, even revolutionise, an industry, what is your next step? Should you:
- Formulate a business plan/canvas model?
- Do extensive market research?
- Bootstrap and spend your own savings to build a minimum viable product (MVP)?
- Get a co-founder?
- Talk to an investor?
Say you’re an experienced entrepreneur who has already thought about all the important metrics for starting a business.
Those metrics might include:
- Barriers to entry for rivals
- Initial start-up costs
- The regulatory environment
- Questions as to whether/how to patent your idea
Once you’ve got the answers to these questions, how do you start?
Here’s a tip: The first step is not to think about money. Instead, next time you find yourself ruminating over a particular idea, first validate audience demand.
Why it’s important to think about your audience as your first step
Raising VC money has been all the rage and hype for the last decade or so. And, with so many up-and-coming start-ups getting funding each month, people may think venture capital is the obvious path to take.
I’ve often seen people on Quora saying, I have this great business idea; how should I approach potential investors? Whom can I speak with about my idea?
One of the answers to that question, which was upvoted, caught my eye. That commentor wrote, “Talk to your ‘potential’ consumers or your target audience.” Potential consumers, the writer pointed out, will help you:
- Understand your idea better
- Find mistakes and areas of improvement
- Evaluate customer interest and willingness to pay
- Understand market potential and size
- Understand the buyer persona better.
All these things will help you at later stages, the writer continued, in reference to fund-raising and shaping your business.
Why you shouldn’t talk to a venture capitalist first
VCs can be useful and smart. If you run in entrepreneurial circles – like networks and conferences – you may find it useful to talk to VCs because they’ve probably already entertained 20 different businesses pitches before your idea arrived this morning. Undoubtedly, too, VCs are in a position to offer a diverse perspective.
So, if you get the chance to meet one, talk to him or her without an agenda. Your only goal is to learn something new.
In fact, you can get amazing insights, such as marketing practices going on around you, what’s working and what’s not; operational nightmares, expansion difficulties, hiring disasters.
A great VC will have an interesting story or two on practically every single facet of business, including starting, scaling and managing a startup. Even more important will be the fact that a VC investor can help you get the pulse of market/investor sentiments.
Yet, despite these positive attributes, VCs are not your first call. In fact, I would not recommend at all that you talk to a VC at the outset about your nascent business idea – and not because the VC will steal your precious concept or not fund your “idea” since it’s just that – an idea.
When you have a proven concept that is based on actual numbers rather than projections, it may then be time to talk to VC investors. But before that point, first talk to your potential consumers and get some traction.
This article was originally posted here on Entrepreneur.com.