One of the most important concepts for an entrepreneur to understand is, at the core of your new company, do you have a better mousetrap or something that is not a mousetrap at all?

I believe all inventions are comprised of two elements. They have a “new” element, which are capabilities that are fundamentally different. Or they have an “improved” element, which is characterized by an improvement to an existing capability.  The relative amount of “new” vs. “improved” is a key element in determining how you look at getting your company funded.

At least in the enterprise space, there is a strong demand for “improvement” oriented companies. This is only logical. Companies that provide an improvement are more focused, are more likely to be able to carve out a niche, and are even more likely to be acquired by a heavyweight that messed up and missed a particular trend.  Both the investment and likelihood of failure tend to be lower.  Just like going for a base hit.

New things, by nature, are much much harder.  The products often create new market categories with initial market sizes of essentially zero. These products typically rely on a disruption of other existing markets.  For example, the tablet market was essentially zero when Apple entered but the market moved from other devices and tech expenditures to tablets as a part of the disruption. While hard to do, the bulk of the large tech companies today started with a good amount of “new” in their product.

In terms of venture investing and funding, every VC has a set of beliefs and models that guide their investing.  Many more VCs will consider investing in companies that offer incremental improvements. The reward is typically lower but so is the risk.  If you have a game-changing “new” idea, there are still VC options but they are likely to be much more limited.  One would never imagine that the tech titans of today ever struggled to get funding but I would wager that most had more than their share of financial struggles during the early years (I have heard a few great anedotes which I will share in other posts). 

I believe it really helps to understand how you want your company to be viewed in terms of the “new” and “improved” attributes. This allows you to tailor your fundraising towards those individuals that are most combatable.


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