Saturday, October 13, 2012

Entrepreneurs Need Focus on their Business Model

 

Mobile health application demand for 2012 and beyond has lived up to the expectations that mobile will be huge in the next decade, replacing desktop and it’s applications professionals and workers on the go.

Several technologies have converged, which include a proliferation of operating systems, iOS, Android, and soon Windows 8.  The growth curve for Android and iOS are spectacular, and as the availability of hardware platforms in tablet form and smartphones increases the market for applications will soar.

It is not just about social media any more. Prospective users search for specific applications in their field prior to buying hardware and operating system to insure the software is available for the hardware for which they are considering to purchase.

Startup Events

Digital Health Space’s new offices in La Jolla California (Golden Triangle) and in Santa Clarita (Googleplex) will hold several ‘meetups’ in each location to bring together private equity, venture capital and health application developers.  Digital Health Space is currently recruiting sponsor(s) for space and equipment to hold startup functions.  Our plan is to provide broadband internet wi WiFi access and/or wired connections.  Desk space, lighting, air conditioning, Google voice answering service.  Digital Health Space will provide marketing and  on all social media platforms for the startup event(s).

It promises to be an outstanding event for venture capitalists, private equity, startup companies and small business entrepenurs to collaborate.

                              

 

Promotion of these events will occur at the University’s in San Diego , including  the University of California San Diego University of San Diego, CalState San Diego, and the Public School Systems. San Diego has an abundant and advance health care system with great innovations and research capabilities, including Scripps Research Institute, and The Salk Institute. Government medicine has a huge presence in San Diego in the U.S.  Naval Hospital and the Veteran’s Administration Hospital, immediately adjacent to the La Jolla Office in the Golden Triangle.

 

San Diego Offers a wide and diverse entertainment and sport  venues, an international airport with direct flights to   Los Angeles, San Francisco and points in the Eastern United States. The climate is temperate all of the year.

 

 

 

Many entrepreneurs work hard on the proof of concept (technical), but skip any proof of the business model (revenue flow). In other words, once they are convinced that the product works, they assume their price, sales channel, and marketing will bring in the customers. These days, the technical side may be the easy part. 

It is not easy  for an engineer or a technology expert to switch gears to become a business person when their background is in science and/or engineering.  The rigors of education leaves little time or energy for  management.  Most often engineers will take advanced business training in an MBA program.  However it is important to have some introductory courses or do some reading on your own. Prior to meeting with ‘financiers’ whether it is venture capital, equity lenders, or bankers it is essential to know ‘where they are coming from’.

 

Suggested reading list:

 

Mastering the VC Game: A Venture Capital Insider Reveals How to Get from Start-up to IPO on Your Terms

The Rainforest: The Secret to Building the Next Silicon Valley

The Google Story: For Google's 10th Birthday

 

Proving the business model requires a different approach than proving the technical concept. For example, one CEO I know gave away his software product to the first ten customers. Customer personnel seemed to like it, and it worked, so he was totally devastated when he couldn’t sell one for a “reasonable” price in the first two months of hard work.

So how do you go about proving the business model? It starts with a customer problem or need, and includes proving the technical concept, but starts earlier and goes much further, per the following key steps:

  1. Quantify problem cost-of-pain first. Before you design your new solution idea, gather evidence and estimates of how much money a customer is willing to spend (if any) to solve the problem. Factor in your margin, and you will have an upper bound on your solution cost. You won’t succeed with a product that is too expensive for the market.

  2. Prove the technical concept. If the product doesn’t satisfy the need, or it doesn’t work, no business model can work. Start by testing the requirements on real customers, and providing “beta” versions to get real feedback. Iterate and improve the fit until your test customers are delighted, not just tolerant.

  3. Use focus groups. Gather some representative customer contacts, and give them your best sales pitch, including price, channel, and support. Then listen carefully to the feedback. Don’t be discouraged if you don’t get it right the first time. Changes at this stage cost almost nothing.

  4. Talk to domain experts. Here is where your Advisory Board can help you in finding real people with deep experience in your product domain, and gather some unbiased feedback. Listen to potential angel investors, who have domain expertise, and aren’t afraid to ask the hard questions on pricing and channels.

  5. Limited rollout. If you have a physical product, try it in a couple of stores first. If you are on the Internet, try one city. This is tricky, since you have to do realistic marketing to see realistic results, but don’t roll out the big viral campaign yet. Look at product costs, margins, commissions, and other expenses to make sure you still have a bottom line.

  6. Get a reference customer. You should descend on that big best customer candidate with everything you have. Don’t give the product away, but make sure he has every bit of service you can provide. He better be so pleased that he is willing to provide a testimonial for your real marketing campaign.

  7. Sample trade show or user group. If you use the big “Coming Soon!” sign correctly, people will stop by your booth for a look. Make sure they are real customers, and that they get the whole story (not just a technical demo), including price and channel. Otherwise their feedback has no value in proving your business model.

                      

All this assumes you have done the right job first in assessing competition, establishing the sales and marketing channels, and optimizing costs. I see business plans with a great analysis of competitor’s product features, but competitor’s business models rarely get mentioned.

Over the last few years, the right business model has become the key to converting a good idea into a winning startup. Your business model can be your competitive edge, or it can be your soft underbelly. Prove it out, before you dive in with the sharks

 

Early planning is now taking place.  Registration will begin in April 2013 for the event to occur sometime in October 2013, exact dates to be announced.

If you have questions contact

digitalhealthspace@gmail.com

Telephone:   951-444-8382

 

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