The best ideas and innovations aren’t always winners, and winning ideas aren’t always the most technically exciting. So, what makes a business idea compelling for investors?
Investors look for ideas that solve real, burning problems. So, your business plan should start off with a clear explanation of the problem that your business will solve for customers.
For a new idea to be commercially viable, someone in the market must have a serious problem for which the idea offers a compelling solution. “Serious” means that it is a problem that is not currently being solved; or if it is being solved, it’s not being solved effectively. Business problems are exciting for investors when they come attached with pain – real pain. Conveying the pain value of the problem grabs investors attention and prompts them to learn more about your idea.
Real problems are ones that customers are constantly struggling with, or problems that customers anticipate will become real in the future. Importantly, they are not what you assume will be problems; the business plan must demonstrate with certainty that you are creating a solution for a problem that really does exist.
The best type of problem is one that keeps customers up at night – that real burning problem. In your business plan you want to use describe the issues and challenges that customers face using sharp, visual, cutting words. The goal is to put investors in the customers’ shoes. There is no room in the business plan for the soft, subtle approach.
It’s easy to confuse a real business problem with an opportunity. The words are often used interchangeably, but don’t. Focus first on problems. (I will look at how to spell out opportunity in a later blog) Describe the issues and challenges the customer faces in a typical day. Whether your customer is a hospital, a corporation or an organisation looking to license your idea, it is critical that you understand the problem from the customer’s perspective.
Most smart investors will tell you that a problem only becomes real when the customer:
Recognises it as real: The customer must feel the urgency to solve the problem. This doesn’t necessarily mean the customer will make a purchase any time soon, but rather that the customer recognises that a problem exists and feels discomfort living with it. If your idea or innovation is a breakthrough or revolutionary, you will need to think carefully about when the customer will be ready to adopt your idea to resolve the pain.
Reckons it’s a viable solution: The idea you are proposing must fit into the customer’s existing systems and processes. Don’t expect the customer to make big changes to their infrastructure or processes to accommodate your idea. To be viable, your idea must fit in with the customer’s ways of doing things.
Has money (or budget control) to solve the problem: Without this, your target customer isn’t really a customer. The customer must be – and have the power – to spend money to solve the problem.
Remember, getting investors attention may require some shock value. You need to grab their attention, while ensuring that your statements are grounded in facts. This is the pain statement and you want to attach your idea to one. Pain statements have an element of hurt, are expressed directly and usually have some statistics to back them up.
To see what I mean by shock value, have a look this pain statement from Cytos Biotechnology, which is investigating a new class of medicines that hold promise for the treatment both of the risk factors and of their associated chronic diseases.
The population of the world is ageing. According to a United Nations report, there are 600 million individuals worldwide aged 60 years and over at the beginning of the 21st century. This number is predicted to increase more than threefold over the next 50 years. The increase in age presents society with a new global challenge, namely epidemics caused by non-communicable, chronic diseases like cardiovascular and respiratory diseases, diabetes, and cancer. The World Health Organization estimates that these chronic disorders now account for an estimated 35 million or 60% of all deaths annually and contribute to almost half of the global burden of illness.
As I run into more pain statements, I will post them for you to look at.