Every Company Needs a Good Map

Hi Roger:

Interesting question, but I don't think there is a single answer. i.e. it depends.

Questions I'd have are:

• is it a small-market niche product?
  
• if yes, does it have any potential application in other niches, with or without modifications?
  
• is your product potentially a market disruptor
  
• how much capital do you have available to put in yourself before you need outside investors?
  
• how big is the potential win if you run with it?

If you don't have a disruptive innovation or a potentially very large market, then your best strategy is probably sell the product to a larger company that has the resources to market it effectively as part of a portfolio and optimize returns. As a little vendor, you'd never have the credibility or bandwidth or reach of the larger company to get full value from a small-market niche product. In this case, the best result for you, the investors and the product is to get it to market and then find a suitable buyer.

On the other hand, if you do have something with potential to be the google of whatever your space is, and you have enough capital to be able to do it your way and retain full control long enough, it makes more sense to design your business model to keep the product and develop more, or be the acquirer of other little guys.

As far as VC preference, for them it's really going to depend on what kind of bets they like to take, and how much support they have for building winning companies vs making lots of small bets and getting out as soon as they can. I don't think you'll find any kind of consensus there.

Paul,
All great comments and observations. At this point I want to keep the discussion generic and in fact, I now have two friends each with a very similar situation. Both are $500+ million markets and both have ideas for expanding on the original test but those expansions may not add that much value before the whole thing is scooped up.

Thanks for commenting. I always appreciate your point of view.
BTW - are you getting a new iPhone?

re: iphone. it's tempting. I love the product and its design, and will be updating last year's article since I think Steve has basically done everything I predicted/recommended (because he gets disruption). Unfortunately, I still hate AT&T -- they are possibly the world's most imcompetent phone company. At the new price point, it really boggles the mind that Steve still values exclusivity over ubiquity. He needs to sell 10x more at this price, and too many people have vowed 'never again' with AT&T's crappy customer service.

So, no. Will stick with Blackberry until I have a choice of service provider.

Paul,
I am at a point where I need to either get an iPhone or a Blackberry. I have the same issue you have about AT&T: Been there, hated it! Still, the iPhone has many cool elements - most of which would just cause me to spend more time with it than is proper.

Most likely, I'll get a blackberry and have 5 gadgets to haul around (iPod, old PDA until I move everything, old phone until I move 500 names and addresses, bluetooth headset, and associated chargers)

To me it would come down to these three factors.
-is is a small market niche product?
-how much potential is there to take it for the long haul?
-is it something that could be in today and out tomorrow? (such as a technology product)

All of this could be affected by how much capital you have as well before outside investors.