Today five very early stage entrepreneurs presented their businesses to me. They all still have much work to do to validate their businesses. I often tell aspiring entrepreneurs not to build anything until they have validated their business idea with potential customers. You need to find people willing to pay for what you have to offer first. I recommend all entrepreneurs read about all that RightNow CEO Greg Gianforte did to validate his business early on. You can find his story here.
Susan Hess was up first today, presenting Hiland Energy Investment. She has set out to create a geothermal power system in California by implementing an existing technology that utilizes holes previously used for drilling oil.
Guest author Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. She has a masters degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her three books, Entrepreneur Journeys, Bootstrapping, Weapon Of Mass Reconstruction, and Positioning: How To Test, Validate, and Bring Your Idea To Market are all available from Amazon. Her new book Vision India 2020 was recently released. Mitra is also a columnist for Forbes and runs the 1M/1M initiative.
After discussing the land leasing and permit challenges, she said she anticipates needing $15 million in financing to move forward. I don’t see how she can raise $15 million given that the company is simply a system integrator of other people’s technology. When I asked her what the value proposition is for an investor, what they will get in return, there was a good deal of fumbling around. An answer to this question should be on the tip of her tongue. Susan really needs to revisit my Clarify Your Story framework to develop a much more compelling pitch that lasts about three minutes, clearly outlines how an investor will make money, and includes real supporting data. Bottom line: not convincing.
Next, Rohan Gulati presented DewInk, a creative online community for 8- to 14-year-olds that helps them to build, share, and exchange stories using his story-building application. So far 300 students have used DewInk, found through their schools or the Web, placing Rohan within the early stages of validating his business. Rohan’s plan is to monetize by selling hardcover storybooks to the children’s parents and he is targeting high-end schools to reach this niche market. This is an interesting and fun idea, but Rohan still needs to figure out how to make money, and he needs to find a pricing model that has enough profitability.
The comparable businesses he introduced were Club Penguin and Neopets, both subscription services and digital businesses, but right now his is a freemium model with a physical product. I suggested that he take a look at how Shutterfly and iUniverse operate. Then he needs to do a full financial analysis, find out what his margin structure is, as well as assess market size, and clearly define his value proposition. All this will help him find a financing model that will work. This could be a small niche business, but if the P&L structure works, then Rohan can figure out how to build it organically with internal cash flow.
Joshua Crumbaugh was up next to present his technology, still in development apparently, that uses a TV remote to purchase goods during commercials. After about 10 minutes of Joshua trying to explain what he was doing, he still had not covered the value proposition of his business and I had to cut him off. This was just too convoluted, focusing on all the wrong things, and poorly thought through. As I’ve said before, as an entrepreneur you need to do your homework. I suggest, as I do on the roundtable registration page, that he goes through my Clarify Your Story questions and hope that this exercise will give him some direction.
Then we had Dorai Thodla presenting iMorph InfoEngine. With this product his team aims to simplify business research for product managers, hedge fund managers, analysts, etc. Since one of my businesses was in a similar space, I’ve done much research of my own in the areas that Dorai was discussing. From my experience, it is in offering a superior framework for the information that would offer great value to his potential customers.
It’s not enough to be better at providing more information in this overload era. It is a question of how well the presentation of the information works for the customer’s specific workflow. I suggest he choose one vertical at a time and find a hundred possible users to share a mock up with and solicit feedback from. Hedge fund managers and product managers have entirely orthogonal workflows, and simply won’t fit the same framework. This is surprising still a very open area and this is a business absolutely worth building.
Up last was Shonta Gooch, who seemed like she did do her homework based on the ease with which she answered the same questions I had asked the others. She has developed a new sanitary product for women, a hybrid of a cup and an absorbent napkin. She owns the technology with the patent pending. She is looking for advice on the best go-to-market strategy, and I think doing a licensing deal with one of the existing big players in this field is the only way to go. They control access to the sales channels, and the advertising alone for such products is way too expensive for anyone else.
I also pointed out that if she can find the product managers who handle this category at major companies like P&G and Johnson & Johnson, they will be the best people to validate her business idea and to tell her whether or not this product will fly. Cold calling is an underrated but still essential tool for many entrepreneurs just starting out.
These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs.
In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures.
You can find the recording of this roundtable session here. Recordings of previous roundtables are all available here. You can register for the next roundtable here.
Photo by Claudia Veja.
