If you’ve been following this blog, you probably have picked up on a consistent theme. Engaging our customers on an emotional as well as a cognitive level can greatly accelerate our success in the marketplace.
What is often overlooked, however, is the value this level of engagement can deliver at the earliest stages of development, long before we enter our target market.
I came across an excellent example of this last week. During a blog site discussion on the value of strategic business planning, a CEO of a technology company entered into the discourse.
They aggressively touted their new software platform as the be all and end all for automating the strategic planning process, forcing the entrepreneur to prepare for the due diligence of a potential investor, and greatly accelerate funding through their automated pipeline.
The discussion was mostly populated by fellow consultants and strategic planners, and the aggressive nature of this CEO came across with an almost threatening tone within the forum. The message was somewhat menacing, of how a set of automated, multiple choice questions could displace the value and livelihoods of the consultants in the discussion.
Whenever a consultant questioned the value of the platform they were quickly dismissed as not understanding the technology. I scratched my head, wondering what this CEO was attempting to accomplish until all of a sudden they mentioned that the platform could be private labelled and used by consultants to improve their efficiency with their clients. Now I was curious! Why hadn’t the CEO led with this positioning statement with a cooperative and supportive tone?
I conducted a bit of my own due diligence and discovered some fundamental flaws in the positioning and value proposition of this new technology. I’ve had the good fortune to conduct market due diligence for a number of Angel Investor groups, and have prepared many, many startups to pitch and successfully secure Angel investments over the past ten years. So you could say I’ve worked both sides of the street, affording me a perspective from a rather unique vantage point.
What became immediately obvious to me was the high probability that the software developers had a very poor understanding of deal flow and the Angel Investor pipeline. The developers of this software were attempting to automate and accelerate the pitch process via the internet, opening a veritable fire hose of opportunities for investment aimed at the private equity community.
Not only does this approach not align with the interests and evaluation process of Angels, it will quickly toss the aspiring entrepreneur into the pass bin long before they have a chance to really pitch. I couldn’t help but wonder if any Angels or seasoned entrepreneurs had been involved in the development process of this platform?
You see, there is no lack of funding opportunities flowing into the Angel community at this time. Their process is one of winnowing out the lesser opportunities in favour of the more promising ones. Angels set up a series of hurdles the entrepreneur must clear, in sequence, to secure their attention and achieve their consideration for investment.
Blasting every Angel Investor group via the internet is a surefire way to exclude one’s self from consideration. It is a small community, they all talk with each other, and most collaborate, fund-to-fund in their investment strategies. The fact is, entrepreneurs have limited opportunities to navigate the selection process, and it is a rare occurrence to get more than one chance at bat with each Angel consortium. Strike out with one too many, and none of the others will even take a look.
For a first time entrepreneur seeking funding, the software sounds fantastic. “All I need to do is walk through the multiple choice questions, post my pitch to the cloud, and I will automatically access every private investor in the world!” The only problem is, this isn’t in any way, shape, or form, how this process works in the real world. If it did, Ebay would have cornered the market on Private Equity transactions years ago!
What Angel Investors will tell you is while there are ample and interesting technologies and businesses to invest in, there are very few management teams worth investing in. That’s the key…Angels are placing an educated bet on the ability of a company’s leadership to execute on their strategic plan. This requires relationship.
Angels have designed their deal pipeline to prompt the cream of the crop, in terms of human talent, to rise to the surface. The process purposefully slows things down so relationships and trust have time to emerge. I can honestly tell you that in all the years I’ve been working with investor-driven startups I’ve never seen one fail because the technology failed. Failure, from my personal observations, is almost exclusively rooted in poor management, creating poorly validated strategic plans, resulting in poor execution.
The rather painful and bitter irony of this example is this company appears to have built their technology in a vacuum. In attempting to provide a well intention tool for automating the strategic planning process, the company did a poor job of strategic planning and development themselves.
If they had engaged and involved their potential customers during the specification process this misalignment would have become clear. Instead of creating value for the entrepreneur, they’re introducing another, unnecessary risk factor to their targeted prospect.
Engage and involve your target prospects early in your development process. Doing so will save you time, money, and cultivate relationships with early adopters and opinion leaders that will champion your cause for years to come.