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Is Your Big Idea Investor-Worthy? Ask Yourself These 4 Questions Pre-Launch

Entrepreneurs certainly aren’t lacking for ideas — but that doesn’t mean every concept is worth pursuing. It’s not enough to separate the good ideas from the bad. It’s about identifying the great ones. Investors want to know you have an idea that can scale and deliver an attractive return on their investment.

For an early stage tech startup to secure seed money, the idea should either be a first-of-its-kind technology that solves a real problem or offer the best price for its features, as compared to the next-best solution.

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For example, after noticing that up-and-coming services such as Dollar Shave Club and Harry’s catered exclusively to men, Georgina Gooley identified a gap in the market. So, she co-founded Billie, a shaving-razor subscription service tailored to women. In January 2020, Procter & Gamble acquired the business for an undisclosed amount.

With sufficient planning, an aspiring entrepreneur can filter innovative ideas to create a product or service that will be lucrative for investors.

Positioning is paramount

Investors and consumers are vital to a successful launch, but each side is focused on different aspects of a tech startup. Investors value a product’s uniqueness and its ability to stand out in the marketplace.

Investors look at:

  • How different is this product from its competitors?
  • What value does the product bring, or which gaps will it fill that current offerings do not?
  • What makes the product or service special?

Customers, on the other hand, are focused more on how the product will improve their lives. They’ll immediately draw comparisons between it and competing products — from price to size to color.

Entrepreneurs should focus on positioning first and foremost. Through positioning, a startup can anticipate and answer customers’ pain points, building consumer trust in your brand.

Brand positioning is the foundation from which a startup’s entire success will be built.

In a survey of 101 failed startups, CB Insights found that 42 percent of them failed because there was no market need for their offering. If a product doesn’t hit on the right selling points (even if the product idea itself is sound), it shows a failure to understand the target audience.

Related: 6 Tips to Improve Your Odds When Facing Investors

Four questions to ask yourself to ensure you have a scalable idea

So, you have an idea, and you think you’re ready for launch. Here are some questions you should answer beforehand.

  1. Is the price reasonable? 

A product must fall within a buyer’s expected budget. Or, if the product is significantly pricier than those of competitors, the features must justify the price. If the product is solving a problem, it should be cost-effective. Otherwise, buyers will simply live without it.

Your company will not succeed without proper pricing. It’s imperative that you have a firm understanding of your pricing objectives, what your consumers are willing to pay and what competitors are charging. Actively manage your pricing, and make sure it’s not set in stone to avoid being caught flat-footed when the landscape changes.

  1. Does a similar product exist? 

Many times, entrepreneurs will consider their products unique, but they are blinded by bias. If the selling point is a unique feature, it must be regarded as unique by target buyers, as well.

Don’t just settle on offering a unique product. Discover the next-best available solution and determine how much more friction you can remove from people’s lives by bringing your product to market. Once you’re able to truly differentiate your product from competitors, you can use that as marketing leverage.

  1. What is the market size? 

Investors value growth and stability. Therefore, you need to know how large the total addressable market is. Look beyond today and understand what alternate industry solutions will be made in the future.

You should perform testing and collect data before launch. All of that will be meaningless, however, unless you listen to feedback and adjust your strategy accordingly. A tech startup must prove it has the potential to expand, and to do that, it must demonstrate a sufficient market size.

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  1. How long will it take for the competition to catch up? 

Let’s face it, a company such as Google has the resources to react quickly and release its own version of your product. Even corporations such as Sonos are not immune to this: Sonos is suing Google for allegedly copying its patented speaker technology to sell competing devices at lower prices. Sonos claimed Amazon violated its patents, as well.

Entrepreneurs are constantly inundated with decisions, but by analyzing the industry and the competition, they can avoid some of the pitfalls of launching their product or service. And by asking the right questions from the beginning, you can develop an adequate product that will entice investors.

Originally published March 9, 2020.

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