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From Bootstrapped to Angeled : Is it your idea or product ?

You’ve shaped up your business idea to flag off. You have a pool of talent believing in that idea and lined up with working prototype with feedback. Now, it’s time for funding to take your idea to concept to design to product to a successful business.

Depending on the idea, startup projects can be particularly expensive and often incur new, unforeseen costs. That is particularly true of technological ideas, which are currently in vogue but require exploratory costs (to pay experts to determine if the idea is feasible) and initial product development costs. Even if a team proves the idea is feasible, they often need to build a working model or prototype to prove that to investors, which can sometimes add thousands of dollars to startup expenses.

Bootstrapped to Angeled_To_Raise_Seed_Capital 1

The vital idea behind bootstrapping in commercial means is to borrow as minimal finance as possible. In two words, you only rely on either on your own budget and savings, on some crowdfunded amount or simply on loans from friends and family. This scenario urges you to borrow insignificant amounts of money and thus keep interest costs minimal. But as the market dynamics populates further, the wider entrepreneurial community starts delivering differing views.

Guy Kawasaki has proclaimed that “you should always be a boot-strapper… too much money is worse than too little” but goes onto to suggest “if you do get offered venture capital, take it, but don’t spend it”.

Most people focus all their time and attention on building their idea, and forget that even the coolest product or service is worthless if people don’t use it. Creating a successful product or service requires two things:

  • A solid implementation of the idea.
  • People that use it.

For the best chance of success, you need to identify the smallest core of your idea that has value to your potential users, build only that, and release it.  This “minimum viable product” or MVP serves as the ultimate idea testing ground.  It lets you build a relatively inexpensive version of your idea, test it with real users, and measure adoption.

Investors see a lot of ideas, which is why they won’t sign an NDA (your idea is not original, no matter what you think). But if you have a team that has delivered products in the past, worked through adversity, and has a failure or two to learn from, then the investor can see a group of people who will protect his investment, and has demonstrated the skills to do so.

So No. An idea will not get you funded.

To be investible, a start-up needs to have a good product-market fit and the potential to scale up quickly to a large market. It needs to be defensible with intellectual property or some other competitive advantage. And it needs to have a credible team in place, people who investors will believe can execute. And there needs to be some kind of proof, also called validation, also called traction.

Building an early prototype also helps you attract tech talent, because it gives people something to look at and play with, and it communicates your idea in a more “tangible” form. Then you can shop it around to potential technical co-founders to get them excited about your vision. If you have the means to actually build a working prototype, so much the better!

Most Angel Investors (and VCs) won’t pay much attention these days without some other sign of traction, especially because the financial and technical barriers to entry are getting lower and lower. Bootstrapped to Angeled_To_Raise_Seed_Capital 2

Additionally, the current market size doesn’t matter. The market size in 10 years is what really matters. You want to be in a small but rapidly growing market. You can change everything in your start-up except the market. So spend a lot of time up front to make sure you’ve thought through your market. “Having value” and “being fundable” are two completely different things.

Two of the most valuable things that the investor community seems to have been seeing from close quarters are: customer feedback and data from pilot research, which can enable them ask questions that lead to product breakthroughs. Angel Investors would need to know how your idea has improved to a bit more than a fledged product wireframe, so that their willingness to invest into those ideas via money, and social reach can increase to ensure that the success of your product is further defines by cutting-edge product development process.

Following guidance is thus seems to have gained ground and immovable traction for all the aspiring entrepreneurs who are progressing from a Bootstrapping channels to Angeled funding:

  • Be value-driven rather than fund-driven
  • Be independent of technologies that make you lose control over your idea
  • Make the customer a base for your product than profit
  • Base your ideas on supply and demand and not on the money it can attract

Once again, this isn’t a strict definition, but the seed round is normally used to fund the initial stage of your company where you’re finding product/market fit, and the following rounds are meant to help with scaling. That said, the road from concept to readiness (aka product MVP) is long and winding. Entrepreneurs’ single greatest challenge in this sphere of activity is balancing bursting creativity with structured, method-driven decision making.

 

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On-Premise or On-Demand Product Modeling: cloud is in your court

On-Premise or On-Demand Product Modeling- cloud is in your court

Do you sound familiar with the situation explained below?

You started out with a Custom Off-the-Shelf (COTS) CRM product suite, but your user adoption changed dramatically, owing to Scale and Technology Transformation, thus leaving you to think over to a new deployment model. Or perhaps, you purchased your Point of Sale (POS) system many years ago and now decided that it is time to switch to mobile network retail solution. The cost of maintenance could be high or you feel it is time to minimize CAPEX.  All of these situations put you in a position to find the need of solving heavy infrastructure concerns and thus make business operation lean, which at the same time must not disrupt the business continuity. Often, an overwhelming task.

Any business transformation is not easy for organizations to adopt and there are pain points associated with it. Be it the On-Premise products/applications behaviour that has gone outclassed or the products/applications dispensability – that require changed approach to position the organization competitively. For specific business functions with high need of control over such products/applications and data even at the price of higher management efforts and slightly more time to market, organizations are accelerating towards the possibilities of cloud adoption. Thus cloud has become a serious business proposition slab from products perspectives.

When deciding to implement a new business management product, there are many factors that need to be considered. Up until the beginning of this decade, choice of deployment, how to deploy and where to deploy – was NOT one of these considerations. Nowadays, most evaluations of solution / product / application platforms include the question of – whether to model the platforms “On-Premise” or “On-Demand”.

cloud_premise_comparisonMost enterprises are tending to evaluate if putting the buck on hosting applications on the cloud is the way forward or not. The answer to this difficult question really depends on the technology landscape of the company and the complexity of operations. For example, a new age start up or an ISV may consider a “Cloud First” model, where all the infrastructure, applications and products may deem suitable to be migrated to the cloud. This greatly simplifies the IT model for that company and allows a provision of leveraging a pay-for-consumption based model. In turn, it results into the galvanization of resource costings, achieving a business flexibility in the initial stages of start-up formation, thus relieving a surplus of cost for low hanging fruits. However, enterprises with legacy applications and investments in existing datacentres should evaluate key considerations before moving to the cloud model.

I underline the below top five considerations associated with product suite selection and how both On-Demand and On-Premise deployments impact upon them. These considerations are broadly categorized as the following:

  • User empowerment
  • Investment timeline and Total Cost of Ownership (TCO)
  • Data sensitivity
  • Availability of internal IT resources
  • Integration

There are always two sides of the coin while arriving at a business decision of: if in-house infrastructure model will suit for business applications or a SaaS model.

Where expensive take, long implementation times, debilitated user augmentation, inflexible licensing plans might be taking the sheen off the On-Premise journeys, that may have left vast quantities of product suites sitting unused on shelves; In contrast, SaaS journeys provide a ‘pay per use’ subscription model, no IT infrastructure to maintain in-house, better user uptake and shorter deployment periods – could appear a bright oven to cook.

Where security and uptime concerns and criticisms about the lack of customisation on SaaS model derive some amount of restraints, On-Premise models can be configured to fit exact business requirements and might suit better large organizations that have complex integration needs.

Where the SaaS model eliminates the need for provisioning of systems upgrades (with upgrading the entire technology stack – the database, the servers, the operating system, the system integrations, etc.) for the company against the service provider – the On-Premise computing products allow the possibilities of having complete control over the data and information– thus, to be able to access information at any time without restriction.

While ROI is effectively recognized quickly with On-Demand model, many thoughts also seem to appear that the recurring monthly fees involved in the invoicing approach make them a bit more expensive option than On-Premise models in the long run.

Forrester Research has pointed out that although On-Demand product suites eliminate big initial investments, they can however include monthly substantial fees, such as for industry-specific functionalities, additional storage fees, integration with On-Premise applications, etc.

But it could also be equally argued that long-term TCO of On-Premise product suites is equally unknown. Can you guarantee how much you need to budget for additional servers and storage in five years? Or how costly the next upgrade project is going to be? And as you need an in-house IT resource to manage and maintain those systems – will that head count go up or down?

Some organizations hurry up towards adopting a ‘cloud only’ approach, assuming cost savings are a guarantee. But not all applications are meant for the public cloud, and moving them may cost more.

Choosing On-Demand or an On-Premise product modelling solutions can be tricky, especially since both have pros and cons and can ultimately dictate successes of the enterprise. Whatever direction that the organizations decide to go in, relates to what the end user customer experiences show up in the end revenues.