What Should You Know?
What should you know about the commercialization opportunity for your product or service?
This question assumes a decision has been made to either seek a licensee or to consider forming a startup company to pursue a commercial opportunity. The answer to the question, regarding how much you will need to know about a given market opportunity and competing products, depends to a large degree on which commercialization path you are entering. Being able to interact credibly with a potential licensee requires a level of preparedness that is significantly different from that which is required to survive the diligence efforts of your first potential startup investor.
What will early-stage investors expect you to know?
Considering the time and investment costs associated with high technology product development — especially medical technology...
Many of the elements associated with “commercialization” must be evaluated early in the process in order to rationalize continued time investment on your part, and to generate the needed assurance for potential licensees or early-stage investors.
You should be able to demonstrate reasonable knowledge of the following fundamentals at the earliest discussions you have with potential funding sources:
- The problem your technology addresses
What, specifically, does your product concept do to solve a particular problem and improve upon the state-of-the-art? Professional investors may refer to this as addressing a “pain point”.
- Basic market demographics
Can you profile a specific subset of customers that will define your target market? Who are the current product or service providers (your future competitors)?
- Evidence of the novelty and patentability of your concept
What have you done to protect any potential invention? Are you following the published research in this area and familiar with prior art? Are you aware of others attempting to solve the same problem?
- Significance of the commercial opportunity
Can you describe a rational business model, and do you have a reasonable estimate of the market opportunity (e.g., # of potential customers and annual unit purchases)?
- If medical, probable regulatory path and reimbursement potential
Have you identified “substantially equivalent” devices and available payment codes?
- Business model rationale
Have you invested adequate time in considering various business model options?
Your response to questions such as these from potential investors will generate follow-on questions that will probe the degree of familiarity you have with the prospective buyers, users, and competitors of your product.
The more you know the better, but...
If you don’t know the answer to a question –– admit it!
At the early stages, such an admission to a prospective investor is usually not lethal, and, in fact, may earn credibility that will raise the interest level of the inquirer when you return with a good answer.
Remember, the other elements of a business plan (and its’ higher level of detail) may not be necessary at this point; however, you can go here to learn what additional information may eventually be required and how it should be integrated into a Business Plan & Presentation.