Vision - Defining the opportunity
Market Research
Market Testing
Stuart W. Hillston
CEO, Constellation Capital
Supported by
Semester 3 – Session 1
• Vision
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Do you have one?
Can you articulate it?
Do you want to be the best?
What is your right to exist, to succeed, to exceed?
• Market Research
– Driven by a market need to create a solution; or
– Looking for a market for a solution you created?
• Market Testing
– How do you know anyone will actually pay for your
product/service?
Vision
• Your right to exist!
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It is a competitive landscape
Lowering barriers to entry
Investors are spoilt for choice
A great many ideas/companies looking for money
• Your vision will differentiate you
• Your vision will convey passion, enthusiasm,
scale & ambition
• Your competition is the company in front of the
investor before you, and the one after you
What is your right to exist?
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Investors want to know why you are investable
You need to know why you are investable
Could “anyone” do what you do?
Is this just a hobby?
What is your motivation?
What are your goals?
The tallest tree in the forest gets the most light
What do investors want?
• Clearly identified target market
(Market research, testing, vision)
• Committed, focussed management TEAM
(Vision)
• Scalable business – huge growth potential
(Market research, testing, vision)
• Revenues – either now, or credible plan to get them
(Market research, vision)
• Valuation – a credible valuation
(Market research)
• An exit strategy
(Market research, vision)
What do investors want?
• Clearly identified target market
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Who specifically will buy your products?
What price will they pay?
How will you get to them?
How will they know about you?
How will you expand over time?
Think:
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Geography
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Age/sex/income/location/employment/education/health/dwelling/work…
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Relate to existing products/services/routes to market
– Surveys, trial products, social media, research, reading, asking,
observing
What do investors want?
• Committed, focussed management TEAM
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How skilled, experienced are the individuals in the team?
How well do they work as a time?
Do you know your strengths and weaknesses?
How will you improve, grow?
How will you fill the gaps?
How will you cope with change, growth, stress, failure?
How have you proven your commitment?
Have you invested cash?
Do you have other commitments?
Have you done it before?
What do investors want?
• Scalable business – huge growth potential
– Will your product (or service) fulfill the needs of a very large
market?
– Is it globally applicable?
– Can the margins get better with scale?
– Are you dependent on the number of staff for growth?
– Will you sell directly or indirectly?
– Can your product work in any language?
– How will you cope with growth?
– How long with the management team last?
– Do you have succession plans?
What do investors want?
• Revenues – either now, or credible plan to get them
– Do you have current revenues (if “no”, skip forward!)
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How big are they – are they significant?
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What is the quality of those revenues?
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Were they from early adopters?
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How did you achieve them?
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Can they be reproduced?
– Are your revenue forecasts credible?
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Is the growth rate achievable?
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Do you have a detailed sales & marketing plan?
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Do they scale?
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Do you understand cash flow, margins, P&L, profit?
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Are you dependent on a third party to make money?
What do investors want?
• Valuation – a credible valuation
– You will raise money at a valuation which is negotiated between
you and your investors
– Is your starting point credible?
– How do you know?
– What have other companies raised early money at?
– What did they exit it?
– Do you understand IRR, RoI, RoCD?
– Do you understand fully-diluted valuations?
– Are you SEIS, EIS eligible?
– What is your personal goal?
What do investors want?
• An exit strategy
– Every business plan says “flotation or trade sale in 3-5 years”
– Research flotations – AIM, Plus, NASDAQ, main list
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How are they achieved, by which companies, what do they cost?
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What valuations?
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What happens post flotation?
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Which sectors are floating on which markets?
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At what point in their growth (how big)?
– Research trade sales
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Who will by you – what type of company?
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Name some typically companies
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What valuations?
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Who has been acquisitive?
– The third way – MBO to provide investors with an exit
Defining the market
• Can you clearly articulate:
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What you do, what problem you solve
Who you do it for
Why they need it
What they will pay for it
Who else will solve the problem
What is different about you
Defining the market
• Do you know:
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Your target customer(s)
The size of the market
Route to market
Best price point
Future trends
The barriers to entry (for you & your competitors)
Top conferences, exhibitions, networking events,
commentators, blogs, key opinion leaders
Market Research
• The three main areas of research:
– Commercial
– Product
– Investor
• What research have you done?
• How thorough was it?
• The better you know your market, your
customers & your investors, the higher the
chance of investment.
Market Research
• Did you:
a) Develop a solution & then research the available
(possible) market(s) or;
b) Research a market and identify a gap which you
develop a solution for?
• What do you think the relative merits are of each
approach?
Commercial Research
• Demand
• Revenue
• Market creation
– Truly unique solutions can be a problem
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Competitors (differentiation)
Price/demand curve
Target customer knowledge
Route to market
Commercial Research
• Route(s) to market
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Direct
Distribution
White label
Alliance(s)
Component of a bigger solution
What do your competitors do?
• Market “shapers”
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Bloggers, commentators, thought leaders
Complementary products/services
Big buyers/users/market influencers
Investors
Product Research
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Position – where you fit in the competitive landscape
Fit for market
R&D
Features/benefits/needs
Supporting requirements (training, technical
support, service, reseller support, maintenance)
• Product roadmap
• Minimum viable product
Investor Research
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Sector expertise
Current investees
Scale of investment
Stage of investment
Competitive threat – who funded your
competitors?
• Differentiation
• Exit strategies
• References
Summary
• Your Vision defines you as an investable
opportunity – or not!
• Understand how and why investors invest
• Know your market – now and for the next 3-5
years
• Understand your competition
• Understand your customers needs/wants/pain
• Understand how you will make (lots of) money!