Thoughts on startups by investors that
fund them & entrepreneurs that run them

Investors Fund Solutions Rather Than Technology

Too many entrepreneurs develop a new product without regard for market demand, then build an entire strategy based on creating a need, rather than acting on an existing market need. Investors characterize this approach as a “solution looking for a problem.” These don’t get funded.

The best startups find a way to drive the market with their technology, rather than push their new technology-driven ‘solution’ on the marketplace. An example of market-driven technology is the basic automobile, but combining a car with an airplane is technology looking for a market.

New technology really doesn’t have any value, until it is integrated into a market-driven solution. Here are a few thoughts on a process that will keep you on the right track:

  • Get real customer input first.  Temper your product with actual market and customer feedback. Everyone’s personal perspectives and interests are different, so the key is starting from market problems, and going from there to technology – not vice versa. Show your prototype to real customers, and listen.
  • Quantify the pain points.  Measure the major pain points in time or dollars, based on feedback from intended users of your product or service. Users that ‘like’ your product, but have no pain, will not pay real money or endure change for your product (even early adopters won’t make a market).
  • Keep it simple and easy to use.  Have you solved the user problems in the simplest possible way, with the fewest possible features? Or have many features been thrown in, just because the technology can deliver them? Easy to use and lots of features are usually contradictory statements.
  • Analyze how competition will react.  If you are tempted to respond with “We have no competition,” then you almost certainly have a solution looking for a problem. Think about how your customers have survived all these years without your product, and how many will pay your price to change. Will your competitors quickly copy you, or under-price you?
  • Experience the pain first-hand.  The best entrepreneurs solve problems that they and their team have personally experienced. This will keep you laser-focused on the solution, and make you more effective and credible in selling the solution.

I’m sure that some of you are thinking by now that if all entrepreneurs followed these guidelines, the world would have missed many great leaps in technology, like the laser, television, and the Internet. These are usually called ‘disruptive’ technologies.

Disruptive technologies and grand new solutions can ultimately change the world, and create a large opportunity, but they are not exciting to early-stage investors for the following reasons:

  • Fundamental changes take a long time to happen.  According to the Gartner Hype Cycle, every major new technology goes through four stages before reaching general acceptance, and that can take as long as 20 years. Investors are looking for a big return in five years. Only people and organizations with their own big resources will survive.
  • Creating a need is much more costly than marketing to an existing need. To build a new market, you have to educate people on the concept, create the “need” in their mind, and solidify it by constant repetition. This means building a brand, viral marketing, and multiple expensive promotions. Early-stage investors won’t risk this much.

So, if you have a new technology that you believe can change the world, you need to team with someone who has really deep pockets. Angel investors can’t help you, and most venture capitalists won’t be interested in contributing the first several million.

Perhaps a better alternative is to focus on existing problems with real pain points, and customers that have money to spend on a better solution today.  You will get help from investors, feel the near-term satisfaction of success, and build your skills and your bank account for that earth-shaking new technology the next time around.

 

 

All opinions expressed are those of the author,  and do not necessarily represent those of Gust.

Written by Martin Zwilling

user Martin Zwilling Founder and CEO,
Startup Professionals

Martin is a veteran startup mentor, executive, blogger, author, tech professional, and angel investor. He is the Founder and CEO of Startup Professionals, a company that provides products and services to startup founders and small business owners.

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Comments

36 thoughts on “Investors Fund Solutions Rather Than Technology”

  1. evbart says:

    I just got some good suggestions about making sure to include a networking component to the meeting.

    Some users want to talk specifics about the software, best practices, training, etc, so we’re definitely going to make sure we dedicate a portion of the meeting to these issues.

    Another group of users, thought interested in the software, are more interested in getting to meet other investors on the platform. Maybe we can structure it, so that the networking can happen after the product sessions.

  2. Any updates on this?

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  4. Inventors should have a clear meeting, comfortable too.

  5. Another group of users, thought interested in the software, are more interested in getting to meet other investors on the platform. Maybe we can structure it, so that the networking can happen after the product sessions.

  6. Good indeed. I don’t want to miss this opportunity. Thanks for such information.

  7. I closed some deals during the meeting.

  8. It is so interesting!!! I’ve read something of the kind, but this article made me understand much more!

  9. Song Laden says:

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  13. Another group of users, thought interested in the software, are more interested in getting to meet other investors on the platform. Maybe we can structure it, so that the networking can happen after the product sessions.

  14. Reseller says:

    It would have been nice to come back to the story and add the details. I’d like to know what people asked for. I organize such meetings sometimes and I always create a poll to make sure I do what people want.

  15. Try to include some networking afterwards.

  16. Please present new product ideas where investment capital is needed.

  17. Yes investor meeting should be held to maximize the investment.Thanks.

  18. SX hawk says:

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  19. Maybe we can structure it, so that the networking can happen after the product sessions.

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