Startups and Investors.
The complex relationship between startups and investors.
STARTUP AND INVESTOR. PERSONAL OPINION
Recently read an article about Elizabeth Holmes. The posh woman has won over a large number of investors. Having received at the same time as an investment $ 700 million for his project.
Her idea was, as I understood, that a large number of tests can be done on one drop of blood. The idea is great, the implementation is mediocre. The presentation of material for obtaining investment is gorgeous. She became one of the youngest startups to raise an impressive amount.
Investors believed that she would be able to implement this project. They bought a candy wrapper, and Holmes herself ate the candy. And moreover, she ate well, she lived for her pleasure. Using investment money for other purposes.
I asked myself a question: could she fully implement her idea? No. At that time, with such a development of technology, this idea is unrealizable. Could she implement this idea now? Yes. The technologies that are now, could help her with the implementation of this idea. But only when making adjustments to the original plan.
The bottom line of this story is logical: investors have lost their money, and now they are distrustful of technology startups, coming up with more and more conditions for startups. Thus, making it difficult for them to live and receive investments. Holmes was charged with fraud. And she faces prison and multimillion-dollar fines. You have to pay for everything.
And based on what I wrote above, we can conclude that the investor approach to startups is hopelessly outdated. Also, the way startups approach investors is outdated.
These are people who come up with ideas. Simplified, but enough. Startups are trying to put their idea into practice.
After reading useless literature, they begin to act. Why useless? Because this literature talks about clients, the market, the business model, and the company's development strategy. But nothing is said about the idea. And young startups, headlong, rush to look for their potential clients, research the market in order to occupy their niche, develop a business plan that no one needs, choose their own business model, prepare a colorful presentation of what does not exist. And much more. That is, they perform a lot of useless actions.
They compete among themselves, who will present their idea more colorfully to a potential investor. Out of 3-10 companies, 1-2 is selected, which ultimately receive investment money. And startups start to develop their own product, i.e. implement their idea. Only a few reach the end, that is, before entering the market. And those who have reached it do not always cope with the realities of life and die slowly or quickly.
Bottom line: the money has been spent, there is no result.
Takeaway: Startups don't go deep into their idea. Having come up with an idea, they don't work with it. They write it superficially. The details and stages of the development of the idea are not well thought out. Everything superfluous, which at the moment cannot be realized, has not been discarded. This is just a wishlist. The principle is: I want and I will succeed.
Because each stage requires specific resources. Each stage needs not only to be thought over in your head, but you need to write it down on paper and think, think. Weigh the pros and cons.
Asking yourself questions: How am I going to implement this? how much money do I need for a specific stage? What kind of specialists do I need to involve at this stage? what is my salary? what is the salary of the involved specialists? how will I interact with them? how will I check their work? do I need a prototype right away? what research do I need to do at this stage?
And only after answering these and other questions, proceed to the next steps. Namely, share your idea. with as many people as possible. This is a slow stage, not a fast one. And write, write, as much as possible about your idea. When you write, you taste what you wrote. When you return to your articles later, you see, maybe not immediately, your shortcomings and mistakes. And you can fix them. Honing my idea, almost perfect. When you can talk about it with confidence. When you can firmly defend your point of view. You can safely discuss with opponents and prove that your idea can be realized.
Based on your worked-out idea, you can write a concept. But this will not be a superficial and crude concept, but a deep analysis of what you want to create.
As I already wrote, the more people you tell about your idea, the more likely it is that you will have your followers who can turn, over time, into your potential customers.
As I wrote above, investors have become distrustful of technology startups. They shifted their guilt and responsibility to startups.
Investors today take a passive position. They wait for potential startups and go through their presentations on their desk. Deciding who to give investment money and who to refuse investment. They like pretty candy wrappers (presentations). They are like crows who throw themselves at everything shiny. Most of them do not understand what exactly the startup is doing. They see only what they want to see. Namely, their profit, which they can get from the implementation of the idea.
What prevented investors from asking Holmes were the following questions before funding her project.
What will a blood analyzer look like? How much blood will be drawn from the patient? Will a drop of blood be enough to get one or another test? How will the analysis information be displayed? What are the consequences for the patient with this method of blood sampling? What part of the body should the analyzer be placed on? What are the priority analyzes? How many of them will there be? Is it possible to determine by a drop of blood: blood group, rhesus, blood sugar, a person's predisposition to the formation of thrombosis, blood biochemical composition, allergy to certain drugs or substances, what diseases a person has suffered, etc. Can this analyzer be used when a person, for example, got into a car accident in order to quickly identify his group and inform the doctors at the hospital? Can this analyzer be used to inject a small amount of a drug into the human body to remove the latter from a state of shock?
Asking Holmes: How are you going to implement your idea? what stages have you prepared? how many funds and resources do you need for each stage? When can we see at least roughly a working prototype? What kind of specialists do you want to attract to implement each stage? how much do you want to pay them? how much will you earn? what research have you done to validate your idea or concept? Etc. every investor can prepare their own questions. These questions should not concern customers, the market, or marketing. These questions should be about the idea and concept, as well as the product that a particular startup wants to create.
A good option for an investor and a startup is when the investor brings their value to what the startup does. And this is not money. This is your knowledge and experience. If an investor is directly involved in creating a product, then, in my opinion, such an investor has no price.
Thank you for your attention and for reading my article.