Heard Bob Caspe, an experienced entrepreneur and adjunct professor of business at Babson, speak at the Venture Cafe at the Cambridge Innovation Center. A brilliantly engaging speaker, with a smart crowd in the room. Key takeways:
- Be wary of venture capital. "Spending other people's money is a dangerous habit". Sell the idea to customers rather than to investors. Your customers may be willing to provide the financing required.
- Sell your solution before developing anything. If a prototype is to be developed at all, only for those cases where customers can't imagine the solution. As an entrepreneur, your entire job is to sell the vision. Implementing it is far easier.
- Businesses fail because they don't find out who truly cares about the solution. Corporations have lots of ways to invest money to reduce costs. There's a long list of capital budget items, and they simply go down the list in descending order of ROI. People don't take risks to save costs, or get promoted for it. People take risks to bring in revenue. Find customers for whom your solution is a competitive advantage to their business.
- Offer truly compelling value proposition. "Imagine two customers, one who's chasing you down to buy the product, and one you're chasing down to sell it to. Which takes up more of your time? How much time do you have?" Don't waste time chasing customers or extracting all the value. Find customers willing to chase you, and offer a deal that compels them to do so.
- People in corporations don't like taking risks. Make your solution risk free for them and revenue positive.
- Be open to exclusive licensing arrangements. This is a corollary of having customers for whom your solution offers a meaningful competitive advantage and revenue benefit. These provide the client security and a reason to close the deal. In practice exclusivity can be limited to specific areas of strategic interest, allowing sales in other areas. Any such exclusivity should also involve minimum sales targets. Be flexible, even if the actual ends up say 20% short of goal, fine, but if it's far short, then exclusivity wasn't that important to the client.
- Make the sale all upside and zero risk for the buyer. People don't act in the pure interest of the company or shareholders, they also have to consider what's good for them in their role. In the example of Olympus, he structured funding for developing CMOS technology as a loan not a purchase or investment. This can take the form of funding the product as a loan (a balance sheet transaction, outside of P&L) rather than as a purchase or investment (which is affects P&L). That put all the upside in the buyer's performance metrics, and all the downside outside it.
- Keep the value proposition extremely simple. For instance, rather than say "This is nanotechnology device which will increase the K-Factor by a factor of four, minimizing the effect of temperature fluctuations and vibrations in transit...", describe how it may address the customer's business goals, such as "We will reduce the amount of product damaged in shipping by 40%, thus increasing your gross margins by 25%, with no fixed upfront cost."
