Rigorous evaluation of market is key in identifying viable startups
By Scott Meacham
Copyright © 2016, The Oklahoma Publishing Company
Success always brings more success. Likewise, capital begets capital and deals beget deals. The best way to get more of both is to create more successful startups with products that the market wants to buy.
Those of us building an innovation economy are constantly evolving to efficiently and reliably direct our resources — money and human capital — at deals with the best opportunity to succeed. We seek evidence that a startup has a shot at solving a high-priority problem that either reduces cost, increases revenue, or allows a business to accomplish a priority that it couldn’t before.
We want to figure that out before an entrepreneur wastes money, time, or the application of a promising technology on a solution that no customer wants to buy.
At i2E, over the last 17 years, we have built a venture assessment pipeline that in FY 2015 positioned 34 companies for funding, with 31 clients obtaining more than $49 million in private equity capital.
We are able to position this many Oklahoma companies for funding because we tackle product/market fit questions first. Venture assessment is the first step for any potential client of i2E. Our three-week program serves as the first step a potential client and our staff take together to determine if the new concept has the necessary market potential. Our process includes an intense working session each Thursday night in both Tulsa and Oklahoma City.
“We challenge the entrepreneurs to prove to us that customers want the solution they are building” said Stacey Brandhorst, i2E venture adviser. “We push the entrepreneurs to ask themselves and their potential customers the hard questions. We show entrepreneurs the weaknesses in their market plan and then work with them to mitigate those risks.”
Between sessions, entrepreneurs complete outside tasks including customer interviews and receive one-on-one support from i2E.
We know we aren’t going to figure out a whole company in a few hours over three weeks, but we can get to the “red, yellow or green” point. On average, two of the six or so companies in each cohort become i2E clients.
It’s not unusual through this process to see a startup pivot from the original business concept to something more closely aligned with what the market wants.
“We try not to discourage, but we do dispense tough love,” Brandhorst said. “If you are working on something that is never going to happen, and we have the facts to support that, why not give it up and work on something that will?”
If, at the end of the three weeks, the company becomes a client, that’s great. If it goes the other way and we determine that the business concept isn’t viable and the entrepreneur goes on to create another business, that’s a good thing, too.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org.
Did You Know?
In 2015, venture capital investment hit a 15-year high with $11.3 billion total dollars, topping every year since 2000. It’s the second highest record since the Moneytree Report began in 1995.