How many brilliant ideas just died in labs or minds finding no path to the heart of a venture investor! Why? Because those innovators simply did not know the value of their ideas.
For an investor, your drive is key
As a VC investor Iím interested in understanding what your motivation is, why I should invest in you and your projects, and why you feel itís something important. Of course, every innovator thinks what heís doing is important. But I want to know why YOU feel this, and why YOU want to spend your time on this.
As a scientist you may want to better understand nanotechnology, medical or biotechnology, energy efficiency, space or telecoms. Your interest may just be the advancement of science itself.
But maybe your motivation comes from market demands and as an entrepreneur, your want to apply the right science to solve a market problem.
Maybe your motivation is moral; you want to help the world, your fellow species; you might want to work on a specific project because deep in your heart you feel itís the right thing to do, which your God wants you to pursue.
Or you simply want to become a billionaire. Thatís also a good reason.
If you tell me as an investor that youíre just given this research as an assignment, if you donít make me believe why YOU believe in this project, if you canít show me that you can convince other people why they should believe in youóthen why should I believe in you and risk my money on your innovation?
When you begin discussions with any investor, you should first and foremost understand yourself. What do you want to accomplish with your project? This is the most important thing an investor looks for at this early stage. As an investor Iím investing in people, not technologies. I want to invest in people ready to solve a global problem and have a high level of ambition, and that to me is much more important than the scientific background.
If youíre able to explain that to an investor, this will help you establish a better valuation for your project.
Avoid cocooning and study your subject
As part of your research into whether your idea is evolutionary, revolutionary or disruptive, you need to investigate the market.
It is completely open to you. Go to Yandex, Google; search, look around. For example, you can find, in two minutes, a very important statistics on the projections of global warming between 1990 and 2100. Itís just there! If your project deals with global warming, youíll find all sorts of stats on whatís going to happen.
You may find different versions of it, or even conflicting or contradictory statistics, but information is there. You should find it, digest it and understand it.
You can think of your technology and begin to search for who else is working on that. Maybe someone else is working on the same idea but from a different angle; maybe itís a competitor to you, maybe itís a collaborator. You need to reach out and find out what other people are doing, what other laboratories and universities around the globe are working on.
This healthy competition and collaboration are part of science advancement. Unfortunately, Russia has been very isolated from this process, but it doesnít have to continue to be.
This isolation is the reason why thereís such a low level of commercialization of technology: because the Russian scientists are working on their own, in their own laboratories in Tomsk or Novosibirsk or Nizhny Novgorod and they are not really sharing their information with other people. They are not able to expand their knowledge fast enough to keep up with the market.
Iíve seen a lot of interesting innovations that just died in laboratories because other laboratories in Japan, Germany, the U.K. or America simply developed their ideas faster and got them to the market. Whoever comes to the market after doesnít have any value.
Itís a global competition: who comes fastest to the market. Who comes fastest is one working in collaboration with other people to speed up the process.
To understand a commercialization strategy you can analyze all the aspects in the form of a Power Point presentation. You can show yourself what the scope of the market is, who needs this, who else is working on it, and based on that you can prepare a proposal to an investor.
Then a sophisticated investor will see that youíve done your homework.
A Bible of your market
If you donít know the value for your idea, how can you negotiate maximizing that value with an investor?
Maybe you have a new revolutionary technology that will change the business process for the production of very specific automotive components. BUT: your buyers are twenty large original component manufacturers in the world. Whatís the value of your product in this case?
You can find that the value is to simply sell the license at a maximum price you can to one of those twenty, because if you want to sell each of them your product, then once you sold it to them, whereís the next buyer?†
You may have invented a new endoscopic piece of surgical equipment. The buying market may be ten hospitals on the planet, or it might be 500,000 different dental offices.
The value of your product may change the way dentistry works. In this case an investor may find this project disruptive and capable of reshuffling the whole market. The value of that idea may be much larger because you may be able to develop a production facility in your region and begin to supply global markets.
If you donít know whoís going to buy your product, how can you begin to estimate the value? Is your product worth $1 or $50m?
Knowing all that you can begin to negotiate it with an investor in a sophisticated wayóand believe me, he will respect you for that.