Wednesday, June 11, 2008

Maybe that is your third product

When I meet with entrepreneurs or Ga Tech faculty/researchers, many times they have a grand vision of their technology and what their first product will look like. It can be exciting and compelling. However, that product idea is usually quite complex and would require a significant effort to get it built and launched.

My response is to instead suggest that their idea would make a great third product. From then we start to talk about what their first product could be. Product 1 should be quick and easy to launch. It should be sold to the same poeple you think would buy Product 3. It should not have too much technical risk. It is probably not very exciting. And, at best, just plan on breaking even. There should also be a second product that acts as a link to the third product on your roadmap. We are creating a ladder.

Why do this?

  • The first product gets you into the market faster.
  • You start generating revenues much earlier in the process, reducing business risk.
  • You reduce dilution from having to otherwise take on more startup capital.
  • You learn from your customers. No matter what they say in a market survey, you don't know what people really think until they have to spend their money on your idea.
  • You will find out which of your assumptions are wroing and what parts of product 3 need to be changed. If you launched product 3 first, you would never know.
Product 3 will most certainly look much different than you originally envisioned. That is due to the knowledge you gain from being in the market that cannot be achieved any other way.

What are the first two rungs on your product ladder?

1 comment:

Anonymous said...

Righteous post, mang! I've been coming to this same conclusion over the course of two failed startups.