The social impact of businesses has been held to the highest of regards in the past decade. Part of the reason for that is millennials have grown up with a more socially responsible mindset than previous generations. Though this has now become today’s norm, many entrepreneurs have gone the extra mile by making solving social problems their main focus. Companies such as Thread International, TOMS, Belu Water, and CellInk are just a few example. With unfortunate social problems making news headlines, one thing is for certain, solving social problems has become what the corporate world would refer to as “good business”.
An uneasy relationship has always existed between investors and entrepreneurs when social problems were in question. If you planned on utilizing socially friendly practices the hope was that it did not excessively affect your profit margins, and if you’re main focus was solving a particular social problem the worry was that you wouldn’t be making enough revenue. All this to say that many investors were hesitant to put too much focus in such businesses. However, with changing societal climates, we are in the midst of a shift. What we see today is that investors no longer have to choose between money, and their values. Hence, the rise of sustainable investing. The reason for its rise in popularity amongst interested investors is simple. People want to make a difference, and figuring out which companies are truthful to their social initiatives has become easier to monitor.
Sustainable investing is a term for investment approaches that consider environmental, social and governance (ESG) factors and their impact. Point in fact, after the controversial era of banking secrecy, sustainable investing has come to the forefront and become one of the fastest growing segments in finance. It is an opportunity to make money and make a difference in the world. By acknowledging its importance and popularity, organizations have further facilitated and incentivized investments in companies focused on solving social problems. For instance, PME funded company Co-Power, identifies energy efficiency projects that generate, or are expected to generate steady, predictable revenue streams by either selling clean power or by reducing energy consumption.
With societal consciousness becoming of increased importance in today’s corporate culture, investors have begun to fish out companies promoting such agenda simply for positive PR. Genuine social impact companies integrate doing good into everything they do. Successful social impact ventures balance for-profit work with community-oriented resources. Failing to do so diminishes credibility and increases customer mistrust. Therefore, entrepreneurs should make a habit of working with institutions and platforms that help verify and certify social impact, examine their supply chain, look for like-minded investors, and build a team that understand the importance of its principles. Act on your beliefs instead of just talking about them.
Making the world a better place and making money can go together. Startups focused on solving social problems endure many challenges that other businesses might not. However, it is important to remember that this is a better time than ever before to appeal to investors. Assuming millennials continue to make social responsibility a priority when it comes to where they work, what they buy, and whom they support, it is safe to say that many investors out there are open and willing to contribute to a greater good.
Over the past 18 years PME has helped guide many diverse businesses to success. Often, entrepreneurs come to us with just an outline of what they aim to achieve. With added assistance from our program leaders, mentors, and committee members, we are able to turn this vision into reality. Here are just a few notable mentions of companies that have been able to turn ideas into lucrative business opportunities with help from PME.
Not only do they have millions of downloads for their games, they have become members of the PME committee. The mission of Budge Studios is to thrill, educate, and entertain children around the world through creative and innovative apps. They have won numerous notable awards for their accomplishments. This includes the Google Play ‘Best of 2016’ App Selection Award for their app, My Little Pony: Harmony Quest. Additionally, they won the Apple Store Best of 2016 for Miss Hollywood Vacation Canada. Budge Studios may be in the business of creating games but their business strategy and objective is rigid and direct. It’s all about being family friendly and universally playable.
Naked and Famous Denim
Naked and Famous Jeans has come a long way since we first met Brandon Svarc. Simply put, the company focuses on one thing only. As they so eloquently state: “No marketing, no washes, no pre-distressing, no nonsense. Just excellent denim at a reasonable price.” Naked and Famous Jeans uses Japanese selvedge denim which is woven slowly and painstakingly on old shuttle looms. Svarc travels to Japan numerous times a year to find new fabrics, and denim mills. Nicknamed the Willy Wonka of denim, he has been interviewed by popular publications such as GQ to share knowledge about his expertise. With all their products made and sewn in Canada,their sole purpose is to sell the highest level of quality to their end-user.
CoPower is where impact investment meets Wall Street. We met founders David Berliner, Larry Markowitz and Raphael Bouskila in 2013. Since then, CoPower has continued to strive and make the world a greener and more sustainable place. CoPower’s team works with clean energy firms to identify clean energy and energy efficient projects that generate steady and predictable revenue streams. CoPower is all about impact investing. For those of you who are unsure of what this is, impact investing is a strategy that involves the investing in companies and projects with the intention of generating measurable, positive, and environmental benefits alongside financial returns.
Not only are Navi and Daniel kick-ass entrepreneurs, but did you know they had the biggest kickstarter campaign in Canadian history? Revols has come a long way since its founding in 2014. Navi and Daniel were endlessly frustrated with finding the perfect pair of earphones. While they understood that ears are as unique as fingerprints, all custom-fit earphones came with a high price-point and long wait times. The dynamic duo decided to take matters into their own hands and create Revols: a pair of wireless customized earphones that provide the same comfort and sound benefits as traditional custom-fits, at a fraction of the cost and time.
All in all, PME has had some pretty driven, and ambitious entrepreneurs come through its doors. This is just a glimpse of many of our success stories. We provide them with the most essential tools entrepreneurs need in order to succeed.
You see it in the media all the time: Company X raised X amount of dollars at X$ valuation. If you don’t work in finance, have a business background, or have knowledge of venture capital, this may sound foreign to you. It’s pretty simple when broken down. Funding rounds and entrepreneurial jargon can seem intimidating to many. All it takes to understand is a step-by-step explanation of its different components, and that’s exactly what we want to do to alleviate your worries.
What is a funding round?
First off, what is a funding round, exactly? A funding round is what occurs because of a company’s need to raise money with help of investors. This means that new partners enter by acquiring part of the company’s share capital. Subsequently, this entails them having control over a part of it. In return for funding, investors expect the company to grow and succeed, and recover more than what they had invested. There are different types of funding (i.e. seed, series A, series B and series C). But, before going into all of that, let’s cover the basics.
Why is it important for startups to get the money?
When investors give money to startups they receive ownership stake in return. What increased investments does is that it can increase marketing budget, affect your speed to market, increase your visibility, and decrease your personal risk. Most investors usually join the project as partners. Having motivated, smart, and connected partners on your team comes with benefits beyond money.
Does the money have to be paid back?
No. If the startup fails, the investors lose out. But if the company gets acquired or goes public, they could potentially make a lot of money. Investors that take equity stake in a startup expect to reap large returns and rewards.
Why not just take a loan?
Although it is very smart not to dilute your business when you are first starting out, taking out a loan can be challenging for a new business. If you are an entrepreneur looking to keep all equity of your business, loans are the way to go. But, it is important to keep in mind that while loans don’t dilute ownership, they have to be paid back with added interest. All in all, many entrepreneurs opt for loans, in addition to funding rounds.
What’s a valuation? And how is it determined?
Startup valuation isn’t an exact science. A valuation is how much the company is worth. Determining this can get complicated, especially for early stage startups. Many startups raise funding when they are pre-revenue, so it’s really just a bet on how big the company can be in the future. There are many different valuation tools and method that can be used. They can vary in the amount of assumptions you need to make about a company’s future, relative to past performance. Most startups take into account the estimated market size for their product or service, revenue, growth trajectory, and the likelihood of IPO or acquisition.
The higher the valuation, the better?
Not necessarily. Raising the valuation raises the stakes. Not only can valuations be ambiguous, a high valuation doesn’t mean much if a company decides to sell for less than it initially raised. Investors would then lose money on the deal. Also, assuming a company isn’t in their last round of funding, what a high valuation has done is set an extremely high bar for the business to reach before being able to raise more funds. This can also mean bad news for employees with equity compensation.
What is seed vs. Series A, B and C?
These designations relate to the stage of investment. “Seed” refers to the startup’s very first funding round. The subsequent rounds have the letters “A”, “B” and “C” attached respectively. There are investors that specialize in different stages of investment. They often label themselves as “seed-stage funds” or “late-stage funds.”
Is there a difference between an angel investor and a venture capitalist?
Yes. The difference is pretty clean cut. Angel investors are individuals who invest their personal finances in a startup. On the other hand, venture capitalists are institutional investors. They manage other people’s money, which they use to invest in business ventures. Many venture firms have limited life cycles, and are expected to provide returns to their contributors at the end of the period. It is expected that most startups will fail, but that the best ones will provide enough returns to cover all the losses and then some.
What do startups do with the money?
Simply put, the money is used to accelerate growth. It can be used to hire new employees, sales & marketing efforts and any sort of production costs. Obviously, this also depends on the nature of the business.
When and how often should a startup raise money?
This varies from business to business. Generally, startups raise funding every 1-2 years. It all depends on how much money is in the bank, how much more is needed and how much investors want to invest in you. Smart entrepreneurs raise funds before the money is needed, running out of cash is death for businesses. Don’t forget that fundraising is a long and arduous process.
How do you get investors?
Of course you should have a solid business proposal, but forming connections with investors is just as important. There is so much value to be gained by networking. Other than investing in someone with an attractive business, investors look for people they can trust to get the work done. Make an effort to go to industry events, build relationships, and introduce yourselves to people who can help make your goals happen.
How should you pick investors?
Whether you are working with an angel investor or a venture capitalist, one thing is for sure: money isn’t the only thing that makes an investor a right option. If your investor plans to be an active member of your business, it is crucial that there is trust in that relationship. It is also important that you find an investor in line with your interests, and that can solve your current problem. Additionally, keep in mind that diversity matters. In other words, you want investors with a complimentary skill set.
So you’ve raised millions. Does that mean you’re going to succeed?
Unfortunately, probably not. Starting a company is always a gamble. Some win and some loose. It requires much more than money raised. It entails consistent pace of innovation, and an immense will to persevere through hard times. Smart and hardworking people can run into various challenges at different stages. The key is knowing how to solve problems that arise, putting in the hours, being patient, and knowing when to pull the plug.
Hopefully this has covered some of the basic questions you had about funding rounds and why they matter. While your investments don’t necessarily determine how successful your business will be, funding rounds have great impact on your business’ potential. Funding rounds don’t provide automatic solutions to your problem, what you do as a result is what matters.
You can only make a first impression once. Introducing your start-up to an angel investor is nerve-wracking to begin with. However, introducing your start-up to an angel investor by e-mail is a lot more challenging. You cannot charm or socialize with an individual by e-mail the same way you would in person. Standing out is much harder. Of course, you are better off reaching out to an angel investor by e-mail after having met them in person. But this isn’t always the case. For this reason it is important that you hatch out a plan that will captivate the interest of an angel investor. As said Alex Iskold, Managing Director of Techstars, there are 3 key notions to stick to when contacting an angel investor: be simple, clear, and awesome.
Your Structure should be simple-
Being concise is key. Your initial e-mail should only about 5 sentences long, with a one-pager attachment maximum. An angel investor should be able to decipher, based on just these few lines, if this is an opportunity of interest. Keep in mind that your e-mail does not need to answer every question that an investor would have. It simply needs to strike enough interest to schedule a meeting. The following steps can provide for a good blueprint for your email.
Introduction: Your name and the name of your business
Business: 2-3 sentences about your business & why it’s interesting
Traction: 1-2 sentence about your traction, customers, and progress over time
Why: Looking for feedback, or connecting because you have background.
Ask: Schedule a quick phone call, meeting, or ask for feedback via e-mail
Be as clear as possible-
Do not use complicated jargon or terms in order to explain your business. Most investors do not have time to untangle your e-mail in search of clarity. Your first e-mail must be able to stand alone as a comprehensible pitching tool. Note that you should have two goals with this introductory e-mail. First, you have to persuade an angel investor to engage with you in conversation. Second, give this person the tools to communicate the information clearly to others if need be. This is not to say that angel investors should not have questions about your business after reading your e-mail. It is simply to make clear that the questions they have should not be with regards to your description of the company but with regards to the company itself and its potential.
Focus on Market-Product Fit-
Often times entrepreneurs mistakenly put an excessive amount of focus on the solution instead of the business problem. Reaching out to an angel investor should include focusing on the ‘why’. A strong opportunity statement, which will communicate exactly why an angel investor should care about your business is crucial. When a profitable opportunity presents itself, investors will almost always be willing to listen, at the very least.
Adopt the right attitude, don’t oversell yourself and be truthful. Standing out by e-mail will be difficult. Especially since many angel investors are busy and receive numerous e-mails daily. Just remember that more times than not, less is more. Keep it simple, and make your case as to why they should at least hear what you have to say.
Finding an investor is challenging. So it is understandable that when you are ready to start accepting term sheets that you would be tempting to accept your first offer after having reached out to countless investors. Though lack of financing can cause you to overemphasize the pros of accepting an investment offer, remember that there is much more at stake when dealing with an investor than your finances. Sometimes simply saying ‘no’ or ‘you are no the right fit’ is the smartest move. In order to evaluate compatibility with your potential investor, there are two things you should focus on:
- The Term Sheet
It’s not just about how much money you get, but about how much you are willing to give up for it. Your term sheet is an agreement that establishes the terms and conditions at the base of an investment. It addresses information pertaining to the identification of parties involved, initial purchase price, contingencies that may constitute changes in your agreement, time frames for decision making, equity, etc. It is your responsibility to know and understand its content. In most cases your term sheet is the starting point for negotiations. Investors, backed with their professional experience and legal team, will draft term sheets in favor of their interests. Be ready to come to the negotiating table equally prepared. If you do not see eye-to-eye on an important matter, it may be best to walk away from the offer.
- What your investor can offer you
Money will help businesses grow. However, it should not be the only thing that the investor has to offer. The reputation of the venture firms is often taken into consideration. Having a credible investor attached to a startup can assist with credibility, which can be helpful in forming business partnerships and hiring new employees.Many investors wind up taking board seats, so for these roles it can be helpful to find someone with industry experience or an expertise in scaling startups. Investors can help with problem-solving and can also make introductions. A good investor should be available to communicate with you, offer expertise, and give you honest feedback on your operations when needed. You should also look to see if said investor has a contact pool that you may be able to leverage in the future.
Declining an investment offer doesn’t mean you are closing the door to a particular relationship. Explain your business needs are for the time being, and express to an interested investor that you look forward to doing business with them in the future. Refusing to accept an investment offer does not have to be a negative experience. Show gratitude, explain your reasoning, and exchange pleasantries on your way out. You never know when you may cross paths in the future.
Crowdfunding platforms, such as Kickstarter and Indiegogo, have become mainstream in the past few years. There are many reasons why early stage entrepreneurs have turned to crowdfunding. Some of these reasons include not wanting to take out more debt, validating product market fit or simply to create a brand following. Crowdfunding serves many benefits such as crowdsourcing, opportunities to pre-sell, and starting a campaign is usually free. As great as these things might sound, having a successful crowdfunding campaign is harder than it seems. For every successful Kickstarter campaign, two fail, and about 9 out of 10 Indiegogo campaigns fail to reach their goals. Here are a few reasons why experts believe that so many crowdfunding campaigns fail.
- Companies Fail to Establish Credibility
There are so many projects and initiatives on crowdfunding platforms, you must find ways to stand out in the clutter. Many crowdfunding initiatives have a reputation for unmet promises. Highly publicized credibility issues run deeper than product or supply-chain issues. The PME funded company, Revols, had managed to avoid such issues with their highly successful Kickstarter campaign, which garnered 2.5 million dollars in just a month. Their Kickstarter video showcased their credible partners, endorsements from industry experts, and specific accreditations to their name. They also hired a PR firm in order to make sure the right image was being spread prior to launch. Two weeks prior to starting their campaign Revols visited established media outlets with product demos in various North American cities. Like Revols, you have to be on top of your PR game.
- The Video is Too Long
A video that is too long is not likely to be shared on social media platforms. Keep your video length between 1 to 3 minutes long, so that people who would like to share your video with their network will be likely to. Sharing aside, people are also busy and have short attention spans. They want something, short and informative to watch.
- The Video Doesn’t Tell a Story
Videos have the capability to tell stories better than any other medium. Your video should have a story line that elicits emotional feelings from the viewer. If your video doesn’t seem sincere, you will have a difficult time getting investments or even people following-up on your brand down the line.
- Companies Aren’t Clear About How They Will Use the Funds
If you know exactly what you’re going to be using your money for, so should your backers. Investors want to know how their money will help you. Putting out vague statements such as “help our business grow” or “we need your help to expand” does nothing to show that you have a strategic plan moving forward. To our previous point, not being specific also doesn’t do anything to boost your credibility.
- No Testing
By testing we are referring to two things. The testing of the product and the testing of your Kickstarter page prior to launch. Before investing people want to know that your product has been tested and that it has garnered positive reviews from users and industry experts. Investors and backers want to be sure that their money is going into a quality good that has been vouched for. Testing your Kickstarter page means sending it to friends, family, mentors and trusted individuals in order to get feedback on its presentation and content. Building social capital prior and during your launch will have immense payoff.
- Your Goals are Unrealistic
Don’t aim to get millions of dollars right off the bat. Even Revols had the objective of raising only $100,000 before they reached their $2.5 million mark. You should plan and set a timeline for the investments you hope to receive. Being conservative with your estimates is always better. Your goals should be SMART, in other words, specific, measurable, attainable, relevant and time-bound.
These are some of the main reasons why crowdfunding campaigns fail. If you do the right planning in order to avoid these mistakes your crowdfunding campaign will already be more likely to rise above the clutter. Even if you don’t achieve your campaign goal, you should still be leaving the platform with more than you entered. You should have more supporters, a longer e-mail list, and most importantly, a better idea of what it is that your consumers want.
Au cours des dernières années, les plateformes de financement participatif, comme Kickstarter et Indiegogo, sont devenues dominantes. Il y a plusieurs raisons pour lesquelles les jeunes entrepreneurs peuvent se tourner vers les campagnes de financement participatif, incluant, en autres, le désir de ne pas s’endetter, valider l’adéquation produit / marché, ou tout simplement créer une visibilité de sa marque. Ces campagnes de financement offrent de nombreux avantages tels que l’externalisation ouverte et des possibilités de prévente, sans compter qu’il n’y a généralement aucuns frais pour démarrer une campagne. Cette approche peut sembler très excitante, mais c’est plus difficile que ça en a l’air. Pour chaque campagne Kickstarter réussie, deux échouent, et environ 9 campagnes Indiegogo sur 10 ne parviennent pas à atteindre leurs objectifs. Voici quelques raisons pour lesquelles les experts croient que tant de campagnes de financement participatif échouent.
- Des entreprises ne parviennent pas à établir une crédibilité
Il existe tellement de projets et d’initiatives sur les plateformes de campagnes de financement participatif que vous devez trouver des façons de vous démarquer de la masse. Plusieurs de ces campagnes ont acquis une réputation de promesses non tenues. Des problèmes de crédibilité hautement médiatisés vont bien au-delà des questions sur les produits ou sur la chaîne d’approvisionnement. La société Revols, financée par PME, a réussi à éviter ces problèmes grâce à une campagne Kickstarter très réussie qui a recueilli 2,5 millions de dollars en un mois. Leur vidéo Kickstarter présentait leurs partenaires crédibles, le soutien d’experts de l’industrie, et une adhésion spécifique à leur nom. Ils ont également embauché une agence de relations publiques afin de s’assurer de propager l’image désirée avant le lancement. Deux semaines avant de lancer leur campagne, Revols a visité des organes d’informations reconnus de différentes villes nord-américaines avec des démonstrations de leur produit. Tout comme Revols, quand il est question de relations publiques, vous devez bien maîtriser votre jeu.
La vidéo est trop longue
Une vidéo qui est trop longue n’est pas susceptible d’être partagée sur les plateformes de médias sociaux. Limitez la longueur de votre vidéo à 1 à 3 minutes — ainsi, il y a plus de chance que les gens la partagent dans leurs réseaux. Mais, même si on laisse le partage de côté, il faut admettre que les gens sont très occupés et qu’ils ont une capacité d’attention limitée — ils veulent regarder quelque chose qui est court et informatif.
- La vidéo ne raconte pas une histoire
Mieux que tout autre moyen, les vidéos offrent la possibilité de raconter des histoires. Votre vidéo doit avoir une trame qui suscite des émotions chez le spectateur. Si votre vidéo manque de sincérité, non seulement aurez-vous du mal à obtenir des investissements, mais les gens auront peu tendance à retenir votre marque.
- La façon dont les fonds seront utilisés n’est pas claire
Si vous connaissez exactement la façon dont vous utiliserez l’argent, vos bailleurs de fonds devraient la connaître aussi. Les investisseurs veulent connaître comment leur argent vous aidera. Des déclarations vagues comme «contribuez à la croissance de notre entreprise» ou «nous avons besoin de votre aide pour grandir» ne démontrent aucun plan stratégique pour l’avenir. Comme nous l’avons mentionné ci-dessus, le manque de précision ne fait que renforcer votre manque de crédibilité.
- Aucun test
Par test, nous faisons référence à deux choses. Tester le produit et tester votre page Kickstarter avant le lancement. Avant d’investir, les gens veulent savoir que votre produit a été testé et qu’il a reçu des critiques positives des utilisateurs et des experts de l’industrie. Les investisseurs et les bailleurs de fonds veulent être certains que leur argent est investi dans un produit attesté de qualité. Tester votre page Kickstarter signifie l’envoyer à des amis, la famille, des mentors et des personnes de confiance afin d’obtenir des commentaires sur la présentation et le contenu. Développer le capital social avant et pendant votre lancement offre des avantages considérables.
- Vos objectifs sont irréalistes
En partant, ne vous fixez pas comme objectif d’obtenir des millions de dollars. Même Revols avait pour seule ambition de récolter 100 000 dollars avant d’atteindre la barre de 2,5 millions. Vous devez planifier et fixer un calendrier pour les investissements que vous espérez recevoir. Il est toujours préférable d’être prudent dans vos estimations. Vos objectifs doivent être SMART, en d’autres termes, spécifiques, mesurables, atteignables, réalistes et temporels.
Voilà donc quelques-unes des principales raisons pour lesquelles les campagnes de financement participatif échouent. Une planification appropriée qui évite ces erreurs vous offrira déjà plus de chances de vous démarquer de la masse. Même si vous ne réalisez pas votre objectif, vous devriez tout de même être en mesure de quitter la plateforme plus fort que vous ne l’étiez à votre arrivée. Vous devriez avoir plus de sympathisants, une liste de courriels plus longue, et surtout, une meilleure idée de ce que vos clients veulent.
Finding the right investor for your business, let alone any investor, is a difficult task. You have to know where to look, who to network with, and the kind of resources your business needs. The last thing you want is an investor who can only provide financial support. You will likely speak to over a dozen of investors before finding the right one for you. It will be a tiring process, but meticulousness is necessary if compatibility is what you’re looking for. Here are 4 tips on how to find investors for your business when the time is right.
- Get an introduction from a mutual acquaintance
Asking members of your professional and social networks if they know any investors should be your first step. Entrepreneurs will have an easier time to get a meeting with an investor when introduced by a mutual acquaintance that the investor trusts. It is important you network constantly and consistently. Networking, whether in a social or professional setting brings about many advantages. The more good relationships you build, the better your chances of being introduced to an investor that is willing to give you his time. Remember that when networking you are not just gaining exposure, you are building connections with the networks of others as well. If someone they know has a need that matches your business, or vice versa, and you’ve made a good impression, chances are you will get a referral.
- Research where they’re going to be
If you have particular investors in mind, research where they are going to be. Many investors spend time at speaker series and conferences open to the public. In order to get the attention of your prospects make sure to attend these events, and have your elevator pitch ready. You might just have a small window of opportunity to speak to them, so make sure you provide them with just enough information to spark their interest, and provide them with your business card. Make sure to get permission to contact your prospect in order to continue the discussion further.
- Understand your KPIs and market
Your KPIs and market will help you determine exactly what kind of investment your business needs. This is what will lead you to the finding the right investor for your business. Understanding your KPIs will showcase precisely where your business is lagging and where it is prospering. You will therefore be able to identify your selling points to your investor. Additionally, understanding your market will indicate the kind of experience you need your investor to have. Which companies have they invested in? What industries are they most interested in? how does their investment track record look? What do they provide the companies they invest in?
- Research credible online communities
LinkedIn is a great online platform to find investors. It is, however, not the only one. There are many social networks that connect you directly with investors from other countries. These investors are usually interested in contributing to the global business environment. Such platforms include Crunchbase, AngelList, Xing, Plaxo, Startup Nation, and Meetup. While it will take much more work and precautions to assess compatibility with an investor you met this way, it should not prevent you from expanding your search to online resources.
Finding investors for your business will be a difficult task. Especially at the beginning stages of business development when your business hasn’t gained much traction yet. Just keep in mind that your relationship with your investor is worth more than a business transaction. Therefore, make sure you know exactly where you are looking and what you are looking for.
Your business’s MVP is more than just your minimum viable product. Sport teams aren’t the only ones with a most valuable player. As an entrepreneur in the product development stage, your minimum viable product is without a doubt your most valuable player. A team’s most valuable player teaches, remains focused, sets reasonable goals, is a representation of security, and gets the job done. All of these are also embodiment of a quality minimum viable product. Saying that your minimum product is also your most valuable may sound like a contradiction. Here are a few reasons why they are not mutually exclusive and what your MVP should accomplish.
- Fix the basic problem you are trying to solve:
This is your testing stage. It is the first step you must take in order to validate consumer need. What do your customers want? How will your product satisfy consumer needs before you decide to invest a significant amount of capital into your product development? Here is where you must balance your product efficiency and usability. At this stage you must aim to identify the core problem your product is going to solve. Products can have a varied set of interesting features, however, if you are unable to prioritize and rank your features based on importance you should probably take a few steps back and re-evaluate your strategy. Your MVP is supposed to be the most basic version of your final product. This will allow you to make the necessary modifications, if need be, based on the responses you will get. An MVP is about learning from your potential customers, not about impressing them. The goal here is to learn about your product and your customers’ expectations in order to prevent spending on unnecessary costs in following stages.
- Identify your Early Adopters
Your early adopters are your trend setters. Identifying the wants and needs of your early adopters during this testing stage is key. First of all, this will help you define your marketing strategy and sales process in the upcoming stages. Because early adopters are very knowledgeable on the industry you intend on entering, they are known to be credible sources of information to members of their network. By identifying who your early adopters are and how you will be able to satisfy their needs, you are bettering your chances at word-of-mouth advertising. Secondly, from the perspective of feedback, they are your most honest critic. They know of most products out there and are not interested in the popularity of your brand or impressing those in their surroundings by purchasing your brand. Early adopters want quality. Early adopters live for new and cutting-edge products. Learning about their expectations will allow to create a quality product and a compatible marketing plan.
- Figure the amount people are willing to pay for your product
Finding out the price customers are willing to pay for your product during the MVP stage will give you further indication on the positioning of your product in the market versus other competitors. This will also give you a better idea for your pricing strategy moving forward. If you are met with feedback that indicates a higher willingness to pay for your MVP, you can explore the possibilities of a more expensive pricing strategy for example. Of course, such a decision also depends on how much it costs to make your MVP.
- Inform yourself on the positioning of your product
Simply put, positioning symbolizes the place your product holds in the mind of the consumer. If you intend to enter a market where you will be competing against numerous other similar products, it is crucial you occupy a unique and easily identifiable place in the consumer’s mind. Because your MVP is such a basic version of your final product, there is much flexibility with the route you can choose for branding. The goal here is to start developing your brand persona and identity based on the feedback you get from your testers. Of course, this in addition to marketing research will lay the foundation for your marketing strategy moving forward. For instance, based on the feedback you will be getting on your MVP, you will be able to identify your main product differentiators, your strengths, weaknesses, and base some of your market research on these components.
- Map out your following stages toward market
Learning from your MVP, means setting up metrics and different forms of measurement prior to testing. Your MVP findings will be your foundation in mapping out the following stages of your business activity. What you need to do is find tangible ways to record and monitor your feedback and research findings. There are some Pre-MVP considerations you should establish prior to testing. You can create a grading scale for answering each of the questions listed below. For instance, a low response would mean 0 points, medium; 5 points, and high level; 10 points. Lower points for questions would require further investigation justifying the unfavorable responses.
- Whether the problem you are trying to solve is really important to users
- Whether users are actively trying to solve this issue now with other services or self-made solutions
- Are they active during the interview
- Do they agree to come and discuss the solution with you when it’s ready
- Do they agree to refer other people to you
- Are they ready to pay for the solution right away
There are also many available online programs and application that will not only help you with the planning process of creating an MVP, but also provide you with useful KPI tools.
Your MVP is your most valuable player. Think about it. A general manager of a sport`s team first secures his star player, his MVP. The team’s MVP is the reliable player that can be counted on to lead the team, deliver the needed results, and perform. At this point the general manager starts to form the team around his MVP. Hence, your added product features. Without your MVP your product loses almost all of its value to its customers. Would you have bought tickets to a Chicago Bulls game if you knew Michael Jordan wasn`t playing? Probably not. At this stage, the goal is to learn. Sometimes this can mean going back to the drawing board. But, what this always means is that you are saving yourself time and money moving forward.