Historically, a startup is not just a new business, but a business based on the development of a technological innovation which has high scalability potential leading to the fast growth of the project’s revenue while entering the market. So this is a technology-intensive product which requires high investments in the beginning but at the same time, it can generate a sharp increase in incomes due to a very large circulation, reduction of the costs per unit of production or service in future.
That is why many founders pay their special attention to the technological aspects of the product. But such a disbalance in the commercial part can lead to serious biases eventually. It is a mistake to classify true engineer and investigators as real startuppers because they are usually the ones who concentrate on the entrepreneurial and commercial issues least of all. This approach has been supported in a certain way by strategic investors who focus on the technology rather than on the business model or commercial perspective of a concrete product. And the point isn’t usually about expanding the functionality of the core product or service of the strategic investor but about the elimination of the potential competitors in the field.
So, there are two basic startup strategies:
The question arises. How can one evaluate the project’s product taking both strategies into consideration?
Here in Rocket DAO we understand the difference between customer value and technological component. That is why we have two alternative product evaluation methodologies. The first one makes an assessment of the product’s ability to solve particular problems. The second one lets conduct technological due diligence of this particular solution. So an investor may pay more attention to the technological or commercial aspect of the project depending on his/her strategic goals. We hope that such an approach will resolve existing contradictions between market and technology-oriented startups.
According to this approach, any product should, first of all, solve the problems of its target audience. It means that the project aiming at winning its customers should understand quite well:
Answering these questions will help the startup understand if there are any target audience and relevant problems on the market they want to enter at all. But it is not that easy to give such answers. The point is that that product creators are usually so much passionate about their solutions that they are a priori completely assured in the huge prospects of the future products. In the early stages, it is enough to at least hypothetically describe the problems and the audience the solution is being developed for (as well as competitors, of course) in order to orient the startup to the market fit.
The main purpose of these questions is to clarify:
An ideal situation is when a startup understands perfectly well that its potential target audience has a problem which at the same time has no product which would effectively solve it.
The second step concerts the values that the product proposes to the market. It is measured as the product’s scalability potential and copy protection.
So the startup has to define:
An ideal situation for this case is when the product’s market is really huge, the project’s value is immense, there are no competitors which could at least approximately solve the audience’s problems, market barriers are well protected (with copyright for example).
Finally, the product is evaluated in accordance with the stage of the lifecycle it is actually at.
The author of the methodology Andrew Kuryan distinguishes the following stages:
The higher is the product’s development stage the more qualitative it is for investors.
Note that the product’s quality is evaluated only from the point of the client value point of view, and doesn’t take into consideration technical implementation. Even the project’s lifecycle stage depend on the number of users.
It is possible that the expert community will change some evaluation parameters in future. But at this very moment, the approach to the product from the customer value point of view proposed by Andrew Kuryan is enough to evaluate the product as an element of the effective startup business model.
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Author: Andrew Miroshnichenko
Translated by: Angelina Dmitruk