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The purpose
of the concept stage is to prove that your idea is worthy of financing, in the eyes
of an investor. You don't necessarily DO anything at this stage, like build or sell
a product.
Why It's Important
If you understand exactly
what you should accomplish, you will be able to move fast, avoid losing critical
time needlessly and approach investors effectively.
How It Works
For example, let's say
your idea is to sell green shoes. You might talk to some stores, find out if they
would buy green shoes, line them up as potential customers. You might have a picture
or drawing to show them, but you wouldn't need a pair of green shoes. At this stage,
you may not actually need a concept prototype -- a web-based business, say, might
need only a mockup of a web site.
Now, here's what you do need,
the milestones that count:
1) Have you quit your job? For
your investors, this is a sign of your commitment.
2) Identify your core team -- don't wait too long to get your people together.
3) You can fulfill the product promise, that is, you can prove the product can be
built, bought, performed, procured, written.
4) The business model you're presenting is acceptable.
Here's what this means. Take the
Rolling Stones and Phantom of the Opera. The industry is the same - entertainment
- but the models are completely different. For the Rolling Stones, performances in
a given city might be three nights and 50,000 people at the concerts, at which point
you've used up the market. For Phantom, performances in a given city might run for
13 years and draw 300- to 400 people each night. Think about trying to promote Phantom
if your model required people to line up for four hours to buy tickets, and then
presented it in a football stadium crammed with thousands of people drinking beer
and chatting.
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