What’s your value proposition?
Thursday, May 1, 2008/
NEW: Wondering why those ‘risk adverse’ investors won’t back you? Perhaps you haven’t articulated your value proposition properly. DORON BEN-MEIR
By Doron Ben-Meir
Wondering why those “risk adverse” investors won’t back you? Perhaps you haven’t articulated your value proposition properly.
You’ve identified a problem in the market and have a brilliant piece of technology that will solve it. You have a talented, passionate team ready to execute. All you need now is a savvy investor to provide the capital you need to make it happen.
So why won’t all of these “risk averse” investors back you? Sound familiar?
Let’s take, for example, a new business that has a very impressive technology to help prevent websites being maliciously compromised (or brought down) by flooding them with bogus traffic (known as a denial of service attack).
My first question to this business owner was: “ What’s your value proposition?”
The founder explained that existing solutions could only cope with the simplest of attacks and that his appliance could handle the full spectrum of attack methodologies for less than the cost of competitors.
That’s fantastic– only it’s not a value proposition.
He partially answered this, by saying why the market needed the invention. What he didn’t answer was why the market wanted it.
As it turns out, large web properties are not keen to publicise the fact that they may have been subjected to a successful attack. Some argue they are yet to be victims and so don’t consider it a pressing problem. Others say that it is the responsibility of their internet service provider (ISP) or web host under a quality of service provision. Some big ISPs say that they have brand name solutions in place… and so it goes.
None of this feedback denies market need, but basic human nature suggests that we tend to look for remedies either once we have already suffered the pain or we know someone who has.
In order to articulate its value proposition, this young business needed to identify which element(s) of the supply chain they were targeting, provide evidence of problem recognition on the part of those targets and proof that the proposed solution actually solved a real-world problem.
They then needed to show what their targets were willing to pay for the company’s solution. All of this plus a demonstration that, despite its immature brand, its solution was so compelling that they could withstand the inevitable competition from better known vendors.
When the business addresses these issues, it will be well on the way to articulating a compelling value proposition – one that target customers can’t reject.
A strong (if not compelling) value proposition doesn’t guarantee you’ll be successful, but you certainly need one to get those investors excited.
Doron Ben-Meir has been an active venture capital manager for the last eight years. He founded Prescient Venture Capital and prior to that was a consulting investment director of Momentum Funds Management. He was a serial entrepreneur over a 12 year period, co-founding five new technology based businesses.