I'm in the middle of due diligence on a Portland software
start-up (
Prolifiq) that did
a very nice, crisp job when they presented to my partnership in
describing their value proposition. With their permission, I thought
I'd pass along a framework they used in case it is helpful to any of
you.
They laid out the possible reasons customers might buy a product
such as theirs as "vitamin, aspirin, or vaccine." Is it something to
help you do better (a vitamin), something to take away current pain (an
aspirin), or something to avoid serious pain later (a vaccine)? In many
ways, this mirrors the way we think about how compelling a start-up may
be on the "nice to have - have to have" continuum, but with more
specific descriptions.
While they didn't make the point explicitly, it is clear that
most of the time people will pay more for aspirin than for vitamins, and
that if the risk of future pain is high enough, may pay the most for
vaccines. I must admit, our bias has always been to invest in companies
more on the aspirin dimension, since corporate budgets seem to flow
better to current pain, than potential pain or potential gain. However,
in business segments where regulatory risk rears its head, a vaccine may
be just as powerful to dislodge budget dollars.
Now, given how clever the Prolifiq team is, they managed to make
the case (still to be verified during my diligence calls) that they are
essentially all three, depending on the customer's need set. Nice work
if you can get it! "Less Filling. Tastes Great! Gives a Great Buzz!"
For most start-ups, your products probably hit just one of the
dimensions. But, as long as you understand which one is your primary
value, you can focus on how that flavor of budget dollars gets released,
and how you get to stand at the head of the line when they do. Then,
if you can articulate that to your friendly local VC, you'll have a much
better chance of convincing us you are in the "have to have" category -
regardless of vitamin, aspirin or vaccine.
