One of the roles I play along with my regular consulting gig is an advisor. I am what’s call a “Navigator” at one of the oldest incubators in the area. Each month, the Navigators get together and listen to a pitch from a resident company. It’s good practice for them (you can NEVER have enough practice pitching your business) and it’s good for us to become better-versed in what’s going on.
Most of the companies headquartered at the incubator are engaged in scientific research of some sort and there are a lot of Ph.D.’s wandering around the building. They know a phenomenal amount about their fields and about the company they’re germinating. The problem is that they don’t seem to know that they’re building a business and not a science experiment. We had one of these get-togethers yesterday and I was speaking to another Navigator, comparing notes about the companies we’ve seen and the pitches we’ve heard. He had found, as had I, that most of these very smart entrepreneurs had no trouble explaining the nuances of some very complicated science but had massive difficulty in explaining how they were going to make money.
A book from a few years ago wrote up research that found that 87.5% of Millennials disagreed with the statement that “money is the best measure of success.” On a personal level, I couldn’t agree more with their thinking. There ARE many more important things in life that reflect success and failure. On a business level, unfortunately, that’s dead wrong. When you raise capital, your ability to provide a return on that investment – i.e. money – is the measure of success. Otherwise, you’re not a business: you’re a charity. Since these entrepreneurs – almost all of whom are Millennials – claim to be building businesses, part of what I and the other Navigators help them do is to focus on the business of their business and not just on the science and their products.
We ask them the kinds of questions I hope you ask yourself. What problem are you solving? Who else is solving it? Why is your solution better? How much will it cost to build your product at scale? How is it priced? What is the profit margin? What’s the competitive set in how big a market? Pretty basic questions, I know, but these are smart people who have never been asked them before. The ones that can answer them clearly are the ones that will get funded and survive. Do you fall into that group?