Bill Joos on Pitching

Bill Joos (or William Wallace Joos, as he prefers to be called in Scotland) spoke at a Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link event on 11 March 2008. Bill experienced plenty of pitches while with Garage Technology Ventures, and shared the top ten mistakes for early stage/startup company business plans and pitches. While his focus was on pitching to venture capitalists, much of what he said is applicable to any business planning process. This article summarises his talk.

Understanding the Odds

During 6 and a half years at Garage Technology Ventures:

(And Bill Joos didn’t say it, but likely only 10-20 of those that got funded will develop into successful businesses.)

In such a fiercely competitive environment, with such long odds, perfecting a business plan and pitch is clearly important. So learn from the 10 top mistakes:

1. “Too darn Long”

Venture capitalists have Attention Deficit Disorder. Everything needs to be as short and to the point as possible. Short text is harder to write than long text.

Some benchmarks:

2. “Poor Positioning”

A “solution looking for a problem” is not a strong case. While there are exceptions, most funding is for “painkillers” - and for those to sell, someone needs to be in pain. Don’t forget to consider who the customer actually is.

Benefits need to be put into context - given a frame of reference. It is unlikely that those listening to pitches will be experts in the field. Bill cited Molly the elephant: Is a “7,000 pound” elephant over or under weight? Is that good or bad?

3. “Lack of Tight Focus”

Avoid “Swiss army knife plans”: Business plans that attempt to enter every possible market immediately: It is hard to succeed in just one market. Justify a focus on the market segment initially, with an “encore strategy” for developing into other markets over time.

4. “Not Enough Real World Market Analysis”

There are 2 approaches when researching markets:

  1. Top down: Citing overall market research, and then claiming an arbitrary percentage of that market as a target.
  2. Bottom up: Detailed research within a small part of the market.

Bottom up approaches show greater understanding and depth, however top down can still be used to validate bottom up.

Don’t just quote the total available market - understand what is reachable. Oh, and do not state the bleedin’ obvious: “Mobile phones are a growth market in developing countries…”

5. “What are the 3 Drivers of your Business?”

What are the key performance metrics that will determine whether the business operates effectively? A simple question, that many cannot answer.

6. “Unclear Business Model”

How will you make money? Or a profit? Particular care is needed where adoption is likely to be slow or dependant on other companies. For example, large corporation (Fortune 500 businesses) have very long sell cycles - don’t expect to sell to them in the first year. Similarly if customers need to be found from among a handful of businesses, exploratory negotiation with those companies is worth doing beforehand.

How well will sales scale? The first few sales are often the easiest, because they will be made to customers that are already well know to the entrepreneur and their team. Subsequent sales might be much harder.

Finally, don’t quote revenue expectations without explaining the assumptions made.

7. “Poor or Incomplete Competitive Analysis”

The startup needs to be distinguishable from the competition. But it must also acknowledge that competition exists and position itself in the market accordingly. Not disclosing the competition either marks one out as naive or a liar, neither of which is positive.

It is common not to understand the power of the “status quo” in a market. This is a particular problem when entering an existing market, because sales need to displace an existing product or service. Displacement sales are the hardest to do.

8. “Weak Team Information”

Admit to weaknesses in the team (such gaps are often a reason for seeking support from a venture capitalist). Know the function of the first 3 hires. Generally venture capitalists will “bet on the jockey - because they pick the best horses” (although I suspect that varies).

9. “Poorly Defined or Weak Go To Market Plans”

Who is going to sell this stuff anyway? Who will have budgetary authority? And who besides the entrepreneur has a vested interest in success - for example, a partner company?

10. “Goofy Fundamentals that Distract”

Startups are initially an exercise in survival. Sometimes an apparently rational decision can backfire: For example, giving an employee a stake in the business accidentally formalises the value of the company, and makes it harder for investors to realise the true value of the business. So get some “adult supervision”: Establishing a board of advisers shows willingness to take advice, and depending on the people involved, reduces the risk of the venture.

Tim Howgego, 13th March 2008. Related topics: Business Plans, Edinburgh, Venture Capital. Comment »

David Law on Design as a Competitive Advantage

David Law has successfully launched and run a number of influential design businesses, including Speck Design. His work ranges from iPod skins to “camera armor” to video conferencing environments. David spoke to a small group at the University of Edinburgh on 26th March 2008. He proposed that design should be at the core of a modern business, as a competitive advantage to differentiate a business from others. This article summarises David’s argument, describing why there is a need to differentiate, his approach to design, targeting of niches, and how to stay ahead.

Design to Differentiate

Things are getting easier to make. There has never been a more informed consumer. Markets for consumer products are highly competitive, with little barrier to entry. All this means that popular designs are likely to be emulated, eroding prices downward. The aim of most manufacturing is simply to reduce cost to remain competitive.

The solution? Differentiation. A small company cannot differentiate products through marketing, but it can differentiate through good design.

Approach to Design

David sees design as “supercharged problem solving”. The aim is to satisfy a user need.

How is that need found? Observe users. Don’t ask them, watch them. Find where they get mad, and design a product that takes away their pain.

Then create lots of prototypes quickly. For real. CAD is too slow and lacks realism. Better to create a paper mock-up, which can be seen and handled. Keep on iterating until the design is right.

Development Triangle

The development process behind a new product can be weighted between three objectives:

For example, a project might be orientated towards speed, with a new product developed in a few weeks. Other projects might be highly cost sensitive. David believes that most companies never consider the balance of objectives, and so tend to end up “somewhere in the middle”.

The Niche

The mantra “always start in a niche” goes against the instinct of many entrepreneurs, who tend to gravitate towards the biggest problem or market, since the reward from success are greater there.

However, niches have a number of distinct advantages:

David used the example of Camera Armor: Products that protect SLR equipment while in use. SLRs are a niche within a larger camera market. From this niche it was possible to develop into the larger market for smaller digital cameras - creating innovative cases and a rather dinky little tripod that snaps out from the bottom of the camera when needed.

Staying Ahead

David Law’s teams consists of a small number of designers. All their products are manufactured elsewhere (in China). The manufacturing process is simple - the real value of what they do is in design.

Could China produce good design? David argued that design needs proximity to the market. However, he did cite the example of Samsung: Historically a manufacturer competing on price alone, they have successfully developed a design-orientated approach, and are increasingly producing genuinely good designs in the vein of companies such as Sony or Apple. [It is possible that eventually Chinese manufacturers will follow this path, and become more design-orientated themselves.]

But if it is easy to copy products, how can value be maintained in good design? It depends on the product:

Tim Howgego, 2nd March 2008. Related topics: Design, Edinburgh, Innovation. Comment »

BarCamp: Living on Virtual Fish

For those that missed my BarCamp Scotland presentation, “Living on Virtual Fish”, you can view it on SlideShare:

SlideShare | View | Upload your own

The following articles loosely correlate to each of the talk’s sections, and provide more depth and explanation:

  1. Learn2Play, the new Real Money Trading?
  2. Adventures in Online Advertising
  3. Thoughts on a Socio-Economic Environment based on Nothing
Tim Howgego, 2nd February 2008. Related topics: Advertising, BarCamp, Edinburgh, El, Learn2Play, Video Games, Virtual Goods, WoW. Comment »

Dave McClure on Social Networking and Web 2.0

Dave McClure addressed a Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link event on 29 January 2008. He outlined some of the advantages of “Web 2.0″, talked extensively on the use of real-time metrics to evolve web services, developed a history of social networking websites, and highlighted the interesting aspects of Facebook. This article summarises Dave’s talk, with some additional commentary from myself.

Advantages of Web 2.0

Web 2.0 is characterised by the:

Dave McClure did not actually try and define the term, which was probably wise. Generally the term is applied to websites and services where users collaborate or share content.

Web 2.0 has a number of advantages (although it could be argued that some of these apply to earlier iterations of the internet too):

Metrics for Startups

I believe the ability to very accurately analyse website usage, implement changes, and then analyse the results, is a key advantage of web-based services. It is an advantage often overlooked by information technology professionals and programmers. I’m not sure why - possibly because web service developers:

Or perhaps Web 2.0 just isn’t mature enough yet for developers to have to worry too much about optimisation: A new concept for a site will probably either fail horribly or generate super-normal profits. The sector isn’t yet competing on very tight margins, where subtle optimisation can make or break profitability. Of course, optimisation of websites can deliver substantial changes in user behaviour. For example, I have found that a relatively subtle change to the position of an advert can alter the revenue generated by over 20%.

Dave McClure developed the AARRR model. AARRR segments the five stages of building a profitable user-base for a website:

  1. Acquisition - gaining new users from channels such as search or advertising.
  2. Activation - users’ first experience of the site: do they progress beyond the “landing page” they first see?
  3. Retention - do users come back?
  4. Referral - do users invite their friends to visit?
  5. Revenue - do all those users create a revenue stream?

For each stage, the site operator should analyse at least one metric. The table below gives some possible metrics for each stage, with a sample target conversion ratio (the proportion that reach that stage).

Category User Status (Test) Conversion Target %
Acquisition Visit Site - or landing page or external widget 100%
Doesn’t Abandon: Views 2+ pages, stays 10+ seconds, 2+ clicks 70%
Activation Happy 1st Visit: Views x pages, stays y seconds, z clicks 30%
Email/Blog/RSS/Widget Signup - anything that could lead to a repeat visit 5%
Account Signup - includes profile data 2%
Retention Email or RSS leading to clickthrough 3%
Repeat Visitor: 3+ visits in first 30 days 2%
Referral Refer 1+ users who visit the site 2%
Refer 1+ users who activate 1%
Revenue User generates minimum revenue 2%
User generates break-even revenue 1%

These metrics become critical to the design of the product. Poor activation conversion ratio? Work on the landing page(s): Guess at an improvement, test it out on the site, analyse the feedback, and iterate improvements. Gradually you’ll optimise performance of the site.

I find this attempt to structure analysis and relate it back to core business performance, very interesting. However, the sample metrics can be improved on a lot, depending on the nature of the site. For example, to track virality (referral), I might watch the monthly number of del.icio.us adds, or monitor the number of new links posted on forums (Google’s Webmaster tools allow that). Tracking users all the way through the tree from arrival to revenue generation needs to done pragmatically where revenue is generated from very infrequent “big-ticket” sales: With minimal day-to-day data, it can take a long time to determine whether a change genuinely has improved long-term revenue, or whether natural fluctuations in day-to-day earnings just contrived to make it a “good day/week/month”.

Now I know this approach works, but why it works is less clear. We might like to think that we are genuinely improving the user experience, and maybe we are. However, it could be argued that merely the act of change is perceived by users as an improvement - a variation of the Hawthorne effect. The counter argument to the Hawthorne effect can be seen on sites with low proportions of repeat visitors: The majority of those experiencing the improvement will not know what was implemented before.

History of Social Networking

Dave McClure’s interpretation of the timeline of the development of social networking sites is as interesting for what it includes, as for what it omits: No Geocities; no usenet; no forums; no MUDs… The following timeline shows key services in chronological order, except without dates - all the services shown were created within the last ten years:

The future may be “Social Prediction Networks”. This is a variation on the theme of using trusted networks to filter content: Instead of Blogging meets Search, I characterise Social Prediction Networks as Digg meets Facebook. Shrewd observers will note Facebook has already implemented Digg-like features, while simultaneously topic-specific, community-orientated Digg-clones are being launched. People gather into interest groups around a topic, and then through use of tagging and rating, the community filters content. The system effectively predicts what other people in the group will find useful. This may be an optimum approach for groups above the Dunbar number (or an equivalent number representing the maximum number of people a person can form stable relationships with).

Interesting Aspects of Facebook

Three were discussed:

  1. Social graph (friend list) - email and SMS (mobile phone) service providers have rich data on the frequency of communication between people, yet aren’t using this information to form social networks. Dave noted that two major email service providers, Yahoo and AOL, are currently struggling to thrive - this could be an avenue for their future development.
  2. Shared social activity streams - knowledge of what your friends think is important. Friends are more likely to influence you than people you do not know.
  3. API/Platform - dynamic behaviour and links across your social network.

Further Observations

Will growth in social networks continue? Yes - the friend list adds value to the content.

Will others compete? Probably, as a “long-tail” of networks, likely topic-specific.

Can social networks be monetarized better? Currently social networking services generate far less revenue than search services. The challenge for social networking sites is to move towards the wealthy territory of search services. At the same time, search services are moving towards becoming more like social networking sites.

How can traditional companies engage with social networking sites? Social networking sites work best for sales where a product has a strong aspect of peer pressure in the decision to buy. The most important advice is not to create a copy of a website: Instead provide less complex content that uses social networks to draw users to a website.

Applications for social networks tend to be over-complicated, normally because programmers attempt to implement functions found in software they have previously written for other platforms or websites. Generally the successful applications are very simple. Some developers have opted to break complex applications into a series of smaller applications, and use the virality of social networking sites to build traffic for one application from another.

Social network applications are exceptionally viral. They can gain users very rapidly, yet also loose users just as fast. Much of this virality comes from feeds, which typically alert friends when a user installs an application. Within a few years the feed is likely to be based on actual usage of an application.

Facebook now allows applications to be added to “fan pages” (or product pages) - so individual users need not now be forced to install an application to use it.

Those using email lists for retention are best to focus on the title of the email, and not the content. Merely make it easy to find a URL in the content. The key decision for the reader is whether to open the email. What the email says is almost irrelevant - they’ve already decided to visit the site based on the title.

Tim Howgego, 31st January 2008. Related topics: Analysis, Edinburgh, Information Management, Social Networking, Web 2.0. 1 Comment »

Mike Masnick on Techdirt, Information and Consultancy

These are notes from a talk given by Mike Masnick, CEO of Techdirt, a “technology information company”. Mike addressed a small Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link gathering on 22 January 2008. He outlined the company’s history and philosophy - “use what’s abundant to solve what’s scarce” - and outlined an interesting approach to the delivery of expert/consultancy business services.

Brief History of Techdirt

In 1997 Mike started running a technology-orientated email newsletter and then website, purely as a hobby. In 2000 he found himself looking for a job, and decided to develop Techdirt into a business. He applied the ethos of “taking a major problem and solving it” to information: Businesses found that there was a lot of information being published on the internet which they could not filter and use effectively. Techdirt’s original business model gathered up information, and then filtered it out based on what they knew each customer would be interested in.

Techdirt was funded by revenue from business clients, not advertising, so survived the “Dot Com” crash. Between 2000 and 2004 there was no money available for investment. However there were plenty of good people willing to work, and a lot of excess infrastructures (servers, etc) available. “Use what’s abundant to solve what’s scarce”: The initial business model used the abundant labour and technology, and did not rely on external funding. That model might now be reversed.

Insight

By 2005 blogging had become more widespread, with news-readers increasingly used to aggregate data. Techdirt can still add value for businesses by managing information: I’m glad to know I’m not the only one with 1000+ unread ‘blog posts heaped up in Google Reader…

While most blogs were of little value for the information they contained, some bloggers were insightful experts on topics. All these insightful people were a resource that needed to be connected to companies. What developed was the Insight Community - essentially eBay for technology experts and freelance consultancy services: Companies announce requirements for analysis, with a set amount of money available for the best (or best 2-3) pieces of work that meet their requirements. Freelance experts then compete with one another to provide the best analysis at the price offered. Companies gain multiple points of view, and access to a wider community of experts on the topic.

Techdirt take 25-40% of the money paid by companies - Techdirt’s value added to the independent experts is in putting them in contact with companies - do the experts’ marketing and networking for them. Ultimately, companies can still employ the experts directly, and save Techdirt’s fee. This may happen once companies become aware of how good individual experts’ work is.

Attracting experts was far harder for Techdirt than attracting companies to supply jobs. Initially a lot of work was generated by technology start-ups, but has since shifted towards better-established businesses, which tend to bring repeat business.

I come from an environment where any competition is solely to attain the contract to start the work. I find the concept of the experts competing on the actual output delivered intriguing. I suspect it only works well in niches where all the expert’s value is in their ability to add unique perspective or insight. A lot of mainstream consultancy involves the management of processes, or deploying teams to gather information. More than one person/organisation trying to perform those tasks in competition with one another would needlessly duplicate cost, with the potential to cause chaos.

Mike “has plans” to roll this approach out beyond the technology sector, but did not detail them.

In Review

Mike Masnick summarised his talk as:

His biggest surprise? “That we’re not more successful!”

What would he have done differently? Hired someone that knew how to manage people… The best moments for the company in terms of outward successes also heralded the toughest internal conflicts.

Postscript: The Music Industry

In response to a question, Mike outlined how the philosophy of selling scarcity, not trying to sell what is abundant, needed to be applied to the music/recording industry. The industry believes it is still selling music as a physical product (the CD), yet in the age of the internet, music is abundant. While sales of CDs are in decline, most other aspects of the industry are very healthy. For example, revenue from concert tickets is at an all time [more-or-less] high. So, rather than fight and try to criminalize its own consumers, the music/recording industry should simply change its business model, and focus on scarce aspects: For example, access the artist. An interesting perspective on probably the best-known case of how not to react to the arrival of the internet.

Further Reading

Tim Howgego, 29th January 2008. Related topics: Analysis, Consultancy, Edinburgh, Information Management. 3 Comments »

Bill Urschel on Internet Advertising Innovation

Bill Urschel is the CEO of the internet advertising exchange, AdECN. William spoke to a Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link gathering on 14 November 2007, about the development of AdECN, its role as an exchange market for internet advertising space, and the future of internet advertising. This article is based on Bill’s talk, which he gave in a personal capacity.

Development of AdECN

William Urschel first realising the market potential for computer/internet ventures when writing computer books. He has started a number of software/internet businesses since, and looks for three things in a new venture:

  1. Market: Something to address of a manageable size, with an overall growth trend (”the rising tide lifts all boats”).
  2. People: 1-5 people with either technology or business backgrounds, and the correct attitude and work ethic.
  3. Product: Address a need… and it is nice if it works.

Historically, advertisers would pay an advertising network, who would then display adverts using the advertising inventory on publishers’ websites. It was common for the network the advertiser dealt with to run adverts across multiple networks. Often business flowed from network to network to network, before an advert actually appeared on a publisher’s site. This resulted in reduced revenue for the publisher, as each network “middleman” took their share: Perhaps for every $1 of advertiser’s money spent, just $0.18 would reach publishers. Waste still existed in the market: Half of the display advertising market was either going unsold or “under-sold” (sold for a significantly lower value than it could attain, simply to fill the space).

How AdECN Works

AdECN was launched in 2002, but didn’t “get moving” until 2004. Its role is to act as a stock exchange for network-to-network advertising deals. The ECN part of the name, meaning Electronic Communication Network, is derived from financial stock markets.

Networks continue to deal directly with their own advertisers and their own publishers. The process will first try and match an advertiser’s demand to a publisher’s inventory within the same network. When advertising demand and publisher inventory within the first network are mismatched, AdECN steps in to broker a deal between different networks. The result is that advertisers get their adverts published, and publishers fill their inventory with paying adverts. The whole auction process takes place in 6-7ms, at the time the publisher’s page is viewed.

AdECN has been careful to make itself an ally of the networks, not a competitor to them:

The neutrality of AdECN is seen as their main competitive advantage over Yahoo and Google: AdECN isn’t an advertising network in its own right. [Although as described later, AdECN may simply be becoming the new breed of advertising network, in a marketplace where advertisers will increasingly deal directly with publishers. I did not get the chance to query this apparent contradiction.]

Contextual and Behavioral Data

Adverts can be targeted contextually or behaviorally:

Currently 95% of all targeting is contextual because it has historically been difficult to match behavioral information in a fast and ethical manner. In the next “3-5 years”, behavioral advertising will move to dominate 80% of online [display?] advertising.

AdECN capture a lot of data, which is increasingly the added value it can offer networks. By design it does not store data: Data is used only in the (near-instant) auction process. Individual networks/advertisers can bolt on their own “black boxes” to AdECN - bespoke software they design to utilise auction data so that their advertising spend is optimised. The most common use of black boxes is to split Cost per Click (CPC - advertiser pays when someone click the advert) and Cost per Action (CPA - advertiser pays when an action is completed, such as an enquiry form completed, or product sold).

Privacy remains a key issue. Self-regulation is seen as the way forward. This is based on not keeping personal data, and instead focusing on core questions like “what is the consumer going to buy?” The history of Gator (spyware installed which monitored browsing habits) shows that consumer pressure will eventually win over advertising network which don’t stick to reputable privacy practices.

In Hindsight

For the first two years of the venture, AdECN did not perform well. For an internet startup, two years is a long time. In the early years, AdECN’s team were “too abstract and too technical”. The software was eventually rewritten. Fortunately the venture’s backers were able to see the long-term potential. The lack of barriers to entry into the exchange did allow many networks to trial it, which allowed business to slowly build.

By 2004 they were “in the right place, at the right time”. They were bought by Microsoft. Bill Urschel couldn’t reveal specifics, but stated that there was “no b” in the price paid. His final round of investors received a x9.7 return over four months, so nobody was complaining. They sold “too early”, but in practice they had to sell: Similar (although William claims not actually exchanges) competitors Rightmedia and Doubleclick sold to Yahoo and Google respectively. It became inevitable that Microsoft had to buy an exchange.

The Future

The underlying market is expanding, and forecast to continue to grow. Critically:

The industry itself will like change, particularly what is meant by the term “ad network”: Advertising agencies can now deal with publishers directly, and use the exchange to handle excess supply or demand - there is no need for the old middlemen, the advertising networks.

The average CPM (Cost per Mile, where a mile is a thousand advert impressions) rates are likely to remain the same where already high (for example, rates around $25 will see little change). However, targeting will allow undersold inventory to be utilised much more effectively, so space sold closer to $0.25 will increase in value. As noted earlier, behavioral/profile targeting is likely to develop such that it dominates within 3-5 years.

Could exchanges move into the television and print advertising arena? Current systems could be improved, but the exchange really needs real-time auctions to flourish.

Tim Howgego, 31st December 2007. Related topics: Advertising, E-Commerce, Edinburgh, Innovation. Comment »

Scottish Innovation: Designs without markets?

Why is Scotland creating a fifth of the UK’s patents, but only gaining a tenth of UK venture capital? David Farquhar, CEO of 2in10, argues that in the technology sector at least, we don’t build the right things: We are not focused on marketing and selling. These are rough notes from David Farquhar’s talk to a Edinburgh Entrepreneurship Club/Edinburgh-Stanford Link event.

What’s wrong with technology innovation in Scotland?

First there is a tendency to focus on Intellectual Property (IP). Then focus shifts to the customer, but by offering services - a different product for each customer. That creates a lot of small businesses that struggle to grow.

What’s keeping CEOs awake at night? Lack of revenue from sales. And their investors? Lack of plans for making sales.

80% of firms are targeting the US as their main market, yet most lack basic knowledge about how to sell to the US market. If you don’t know how much you’re going to need to pay a US sales-person, how robust really is your business plan?

Market focus

Two thirds of the most highly valued technology comes from the US, so why not adopt their core philosophy? Build around a market problem, and sell the way customers want to buy.

To misquote Ben Holmes (Index Ventures):

“For every £1 invested in building, spend £5 on marketing and selling.”

Practices and structure

There is not a lack of sales talent in Scotland, nor a crisis of confidence.

There is a need for more best practice to be adopted, specifically:

Most startup firms are structured poorly. Typical startups contain a CEO (who can talk) and a CTO (the brainy one). A structure then develops with engineering and sales/marketing separate.

Instead, sales and marketing should be separate functions, with a “healthy” tension between the two. Product development should reside within the marketing function, not with engineering. This often marginalises the original brains behind the operation (CTO) within the structure, but is necessary to keep market focus.

Wolfson

Wolfson Microelectronics is one of the best known Scottish-based technology firms. Its audio technology is used in products such as the iPod and XBox. It was started in 1984, but by 2000 only had revenue of £6 million per year. To prepare for floatation (IPO) it strengthened its board, including people who had worked in the US. They introduced concepts such as product managers, which fundamentally changed the way the business operated. By 2007 revenue had risen to £180 million.

Still marketing

Failing to understand the buying cycle is a key criticism of selling: For example, a new product might only be purchased as part of an existing product - selling the new product separately to consumers might not work.

A market can be defined as, “a group of customers with the same pain and money“. Money or else they cannot buy. Pain because they have to have a reason to buy. And a group because they have to talk to one another (markets follow a few lead individuals).

It is important not to make assumptions about what the market requires. Chances are the market isn’t how the startup team envisaged it, or has different priorities.

Lumigent was highlighted as a good example of how one technology could be pitched to several different audiences.

Siebel

David showed how Thomas Siebel’s Customer Relationship Management software was developed.

It starts with a given idea, in this case based on exposure to the problems of potential customers. The IP stems from that given idea. IP is important for product differentiation. A market segment is identified (again from the given idea) that both has pain and money. From the pain and IP, develop a product. If there is competition, it is necessary to address a specific category. Finally, from the product and category emerge a position - the claim on which the product will be sold. And from that, revenue is generated.

Further reading

Postscript

This pattern is not entirely restricted to Scotland. It seems a common complaint that the UK and Europe is much better at creating things than commercialising them, in contrast to the US, which is good at commercialising them. In subsequent discussion it was noted that in the US engineers are often taught how to commercialise ideas within universities, which rarely happens in the UK.

Tim Howgego, 6th November 2007. Related topics: Edinburgh, Innovation, Venture Capital. Comment »