That is the salient question posed today by a potential investor in relation to a startup company’s presentation on its medical product and strategy. Why had he asked that question? The greatest companies are those which continuously design and build new products. Any product has a finite lifespan. A great company must acknowledge that product’s finite lifespan and must create newer, fast selling products.
The best example is the continuing innovation that Apple does each and every year – from desktop computer to portables to iPhones to iPads, etc. Apple’s currently high stock value is a validation that Apple generates a wealth of new, innovative products. And this is what long term investors expect of any company. This thought process impacts the outline of any business plan – what kind of innovations can I include in my company’s description as constant changes to my initial product in my strategy? How do I address that strategy to any group of investors?
A true, valuable company must create a vision. A successful initial product begins the company’s growth but that product cannot be the only end game. For example, I have a medical device for sleep apnea. But to create a real company to present to potential investors, the product should only be a stepping stone for other products.
In pursuit of that ongoing ”product vs. company” strategy, I concluded that the medical device be modified to include electronics. Why? This additional feature exploded many more revenue possibilities that would include data mining and biofeedback – all of which would come from semiconductor miniaturizations. Most importantly, the electronics also expanded the product’s application to other diseases. This new feature diversified horizontal and vertical markets in one fast swoop. And this new element created a “company”, not a “product”.
Equally important, the strategic product development process assisted in drafting the description of the company – from one that “manufactures a medical device for sleep apnea” into a larger, longer lasting, investable company that “designs, manufactures and markets smart medical devices” for the public. Which company would any investor pick?
And that is what the investor was addressing today. He saw a startup’s product with a narrow application for a specific medical condition and, though the product functioned well, once the market has been penetrated, its revenues would drop precipitously. To use the euphemism, that startup company was a “one trick pony”.
So the lesson learned from today is that any entrepreneur who is interested in attracting investors must consider what he/she is building – a product or a company? The entrepreneur must think creatively on what the original product can accomplish. Think out of the box.
A few days ago I watched a Thomas Edison documentary. Mr. Edison thought of the same “product vs. company” challenge when he invented the light bulb. He simply did not invent the light bulb, but he also designed the electrical networks and generators that would support the light bulb. Investors were too concerned about his extensive development time, and had no idea why Edison took so long in inventing a functioning light bulb. The final result? He built an electric company, not only a light bulb. Every entrepreneur should have the same prescience. And the Edison investors were well rewarded for backing an electric company that still operates hundred years later. Since Edison’s time, the light bulb has morphed — but not the electric company.