So you “believe” you have a great business idea and now you recognise that you need capital in order to bring your concept to life. The big question is; who out there is likely to take a “punt” on your idea?

The simple answer is that while there are exceptions to the rules, the key targets who are likely to punt on a concept only is going to be friends, families and close associates. And understand this; while they may like your idea, in reality they are really investing in YOU! They believe in you and have sufficient confidence in you to risk a few dollars.

But what about sophisticated investors with serious investment dollars?

Apart from the 1 in 1000 standout earth shattering disruptive concept, in the majority of cases these investors will want PROOF of your idea ………………… validation of concept.

So, how can you validate a concept when you do not have an actual product?

Proto type / Beta Program

It may be a fact that you need to engage with family, friends and associates to gather up sufficient funds to build a proto type (product based) or to run a beta program (software/services based) that enables you to not only validate the customer responses but to also “test” the frameworks in which your concept will operate.

Of course you’re in between a rock and hard place; you want to keep your concept under wraps as much as possible but you still need to validate your concept. Validation is quite statistical as long as you have already identified your target market and profiles of who will be your customers. When considering testing your prototype or beta program, engage with trusted target market participants and have them sign a Confidentiality Agreement.

Know what validation data to collect

Should you get to the stage of being able to present your concept to sophisticated investors, then consider placing yourself in their shoes; what data validation do you think they would want to see. While it is greatly dependent on product/service/concept, as a guide, know what is very important to investors, such as:

• What problem are you solving and to whom will this appeal?
• What size is the potential market (domestically but also globally)?
• How many have tested your prototype/beta program?
• What were the results?
• Did you test for price sensitivity, how many units people/businesses would buy, the reasons why people would buy, what learnings did you gain from the testing?

Primary and Secondary Data

From running your prototype/beta program campaign, you are gathering “Primary data”; the very best form. However, do not forget to do your homework and identify “Secondary data” reports and findings that assist you in validating your concept.

Today the internet is an endless source of information and therefore even if your concept is an earth shattering disruptive idea, there is likely to be an enormous pool of University, Government and trusted brand reports and studies on either your target market or the problem that you are solving. Be sure to spend time and learn as much as you can, then utilise significant data findings that collaborates your concept idea.

One key point though: be sure to ensure that your quoted studies/reports are in themselves validated and trusted sources. There is nothing worse than a potential investor discovering that your source is simply wrong; this has the potential to question your judgement on the information used.

Surveys/Focus Groups

Today this is no barrier to gathering data that can validate your concept. With tools such as Survey Monkey (quantitative research i.e. surveys) and Klzii (qualitative research i.e. online focus groups), you have the ability to gather strong insights as to the wants and needs of your target market. Surveys can give you volume; i.e. 79% of respondents saw value at the product priced at $49.95 whereas focus groups give you the “why” i.e. “at $49.95, this tool saves us 8 labour hours which is the equivalent of $400 ……… I love it and will use it”.

What validation says to the investor

The pure fact that you have invested resources into validating your concept through a prototype/beta program tells investors an enormous amount about you the entrepreneur. Not only in the data and outcomes you have been able to gather, but also in the level of thinking you have gone to. It sends a clear message that you are methodical, willing to learn, adaptive, objective and professional in how you go about business. Remember, the sophisticated investor is seeking to place funds, yes in what they see as a business opportunity, but also with people who have a high probability of turning that investment into a very positive return.

To discuss your needs about being Investor Ready, contact Trevor Holmes, CEO PEGG Business at trevorh AT privateequitygateway DOT com