Having a unique element attributable to your product or service is absolutely essential to getting financing and to building a successful business.
The definition of what makes something special and unique will differ from industry to industry, but it can most easily be classified as the ‘wow factor’. When the hand-held music player industry was in its infancy, the release of the iPod made people go ‘wow!’ even though it performed the same function as the other mp3 players released before it. Derived from that reaction is an acknowledgment of benefit, meaning that customers will be more than happy to open their wallet to purchase the product/service. Unfortunately, there is no formula to achieve this – it could be the aesthetics of your product, your superior customer service, a feature that nobody else has, better support for customers…the list could go on. More unfortunately, it is almost the single key factor that investors will drill down on: why will your market buy your product over your competitors? What is the benefit, and is it great enough to steal market share?
Without the ‘wow!,’ especially in the technology business, you are nothing.
When entrepreneurs are pitching to financiers, they typically talk about market statistics. If the market is a $1 billion dollar market, they need only to capture 1% to make themselves a $10 million dollar company, right? Well, that’s true – but it’s not what investors want to hear.
They actually want to hear a bottom-up strategy – where entrepreneurs are able to strategically outline why people will by their product. If there is no obvious unique element or visible benefit to the product/service than it will be tough to compete no matter how big the market is.
The reason this is so essential is because most businesses are trying to get financing based on the pro-forma revenue projections they have made. These projections are made based on future sales, which are derived from the perceived number of people who will purchase the product in the future. The whole sustainability of the business revolves around these projections being reasonable, so the product/service has to sell.
People putting their dollars into you and your company want to see something exciting. Walk into an investors office with a business plan for a restaurant and they will hide under his desk until you leave. The trick is to create something that is unique – which requires some serious work. You should be able to clearly describe your product or services’ value proposition in less than 10 seconds.
If you think that maybe you might have something special, make sure that you develop your value proposition, business plan, pro-formas and market research properly. Hey, you may only have one chance and you’ll want to nail it.