Blog Archives

Seeking Investment To Fund Your Product Idea? Helpful Tips

March 27 2012  |   leardonsolutions  |  All Posts, Business Tips, Inventing Profit, Product Design, Prototyping  |  Comment

Crowdfunding, Leardon Solutions, Product DevelopmentA common question asked by start-ups, entrepreneurs, early stage engineering teams, inventors, and innovators early in the product development life cycle typically revolves around how to get early investment to develop their product idea and take it to market. This question is usually asked when the product idea is in the pure concept phase without intellectual property, prototypes, or business plans. In this stage, the product idea isn’t very valuable to an investor so it is necessary to take the idea to the next level to draw in potential investors or individuals on crowdfunding sites. To best prepare for finding money to take the product idea to the next level, it is necessary to pull together a Proof-of-Concept Prototype of the product idea and provide the Proof of Demand for their product idea. With these in hand, the team seeking money will be way ahead of others and will stand out to angel investors, early stage investors, and crowdfunding sites.

A business plan is important if an entrepreneur or start-up company is setting out to find funding for their idea. The work done to pull together the business plan will be summarized in the executive summary which will be handed to the potential investors or shown on the crowdfunding sites. Three absolutely important parts of the executive summary in this early stage are The Problem, The Solution, and The Opportunity. These parts of the executive summary will prove that the team seeking funding has identified the problem that the product is trying to solve, has shown how the product solves the problem, and has proven that customers want to buy the product.

A Proof-of-Concept Prototype is necessary to show that the product solves the identified problem as described and also to help demonstrate the Proof of Demand in the Market. People handing out money are looking to see that the team seeking the money has proven that the product concept functions as expected and that this Proof-of-Concept Prototype has been used by potential customers that would buy the product if it existed. The more data that can be gathered from real people showing that the product is useful to solve their problems, the more convincing the pitch to the investors or crowdfunding sites. Proof-of-Concept Prototype and Proof of Demand are the two key areas that investors are evaluating so that they make a successful investment.

No matter if you are trying to get investment from crowdfunding sites such as Kickstarter, angel investors, accredited investors, SBA loans, small business innovation research grants (SBIR), or innovation vouchers in some E.U. countries, here are some tips on preparing for finding investment.

  • Be sure to know how much money is required to take the product to the next level. If a crowdfunding site such as Kickstarter is being used, make sure that the expected project costs match the crowdfunding “ask”. The money received must be enough to deliver.
  • If you are using angel investors for early stage or seed funding, be sure that you communicate the sustainable competitive advantage of your product through the demonstration of the Proof-of-Concept Prototype.
  • In order to find investors for your company, put your network to use. You will probably find that within the list of people you know, somebody will be able to refer you to somebody who funds start-up or early stage companies.
  • If you truly believe in the product idea, you will inevitably put “skin in the game”, meaning that you will invest your own money to get as far as possible until you receive outside investment. Investors need to know you are committed and spending your own money will help convince them of that.

Need more information? Please contact us with any questions or contact me directly at joseph.donoghue ( at ) leardon.com

Tagged , , , , , , , ,

Tips to Cut Product Development Costs

March 6 2012  |   leardonsolutions  |  All Posts, Business Tips, Manufacturing Tips, Product Development  |  1 Comment

Leardon Product Development Tips, Manufacturing ServicesMany innovators, entrepreneurs, start-up companies, and small/medium enterprises have very limited product development budgets. Therefore, these companies need to be very smart about properly spending their money to continue moving forward in the product development life cycle and saving cash for later in the product development game. In order to save costs, many organizations try to cut corners by integrating or altogether skipping product development phases. This not only ends up costing more money but the total time it takes to complete the product will also inadvertently increase.

Product Development is a process that when followed properly results in a tangible product that can be sold to customers for revenue and hopefully profit. In order to get quickly into the revenue stage, it is important to develop a process that results in fast product time to market, high quality, and minimal development costs. Throughout this process, there are ways that the entrepreneurs, innovators, or small companies can save money without cutting corners.

This is the first article of two providing tips on how how entrepreneurs and companies can be smart and spend the least amount of money throughout the product development life cycle. Check out these first three tips:

Define Your Product Before Starting Anything!
This might sound like an obvious suggestion but many companies and entrepreneurs begin product development without really knowing what they are trying to design and produce. The first step before commissioning new product development should be to document the required features and functionality so that there are goals for the team to pursue. Without first defining and communicating these requirements, the team will be moving forward blindly, wasting valuable time and money on unnecessary changes caused by the vagueness and ambiguity of the cosmetic, material, functional, and engineering requirements.

One way to compile a complete list of product specifications is to answer the following questions:

  • How will the product perform and what are the functional characteristics?
  • Will the product interface with other products outside of your control?
  • What are the industrial design requirements (the look of the product)?
  • What are the human factors requirements (the feel and human interaction of the product)?
  • Are there any installation, support, service, and maintenance requirements?
  • What type of qualification, regulatory, safety, and standards compliance are required?
  • Should the product be compatible with other products and if so what are these requirements?
  • What are the packaging, shipping, and labeling requirements?

The effort required to generate the product specifications list might seem unnecessary or excessive before starting new product development. On the contrary, this list is necessary to determine the product goals, will be used throughout the product development life cycle, and will save the team valuable time and money by focusing the team on the proper goals and objectives.

Make Sure The Product Functions as Envisioned.
Once the product specifications have been defined, the team must determine which specifications have yet to have technical feasibility proven. This phase of proving technical feasibility requires the use of proof-of-concept prototypes that bear little resemblance to the final product. As the name implies, the goal of this proof-of-concept prototype is to validate that the idea and concept is technically feasible and functions as envisioned.

For complex products that have multiple functional aspects, do not try to save money by integrating all of the functions into one all-inclusive prototype. Instead, it is more efficient to create proof-of-concept prototypes for each of the independent functions of the product. Remember that the goal is not to make a prototype that looks like the final product. The goal is to prove that it is possible to make the prototype function as specified in the product specification list. Making multiple proof-of-concept functional prototypes will allow the team to efficiently make changes to each prototype to find the optimal conditions that result in the function required.

Limit the Quantity and Increase the Utility of Prototypes.
Every prototype fabricated in each product development phase should be utilized as efficiently as possible. This means that there should be a qualification and test plan associated with each prototype. By documenting the test plan for each prototype rather than just blinding ordering a large quantity of prototypes, the organization becomes aware of the costs associated with each prototype while increasing the utility of the prototypes.

During the product development life cycle of the floe from Apt Innovations, the qualification tests for each prototype produced were clearly specified. As quoted in the BBC news article, Managing Director Jason Paul states that the prototypes looked “smarter” than past prototypes but in fact these prototypes were also smartly utilized. New new prototypes were only ordered after qualification tests were performed and design changes were required, saving Apt Innovations significant money and minimizing waste.

Only fabricate the quantity of prototypes sufficient to meet the qualification needs of the team plus a small number of replacements. Do not order a high quantity of prototypes in order to get a lower price per prototype. The additional prototypes purchased will usually be a total waste of money since design changes and prototype reworks could be required after performing qualification testing. Even worse, the additional prototypes might need to be scrapped as significant design changes could be needed to continue the qualification testing.

Need more information? Please contact us with any questions or contact me directly at joseph.donoghue ( at ) leardon.com

Tagged , , ,

Business Tips for Entrepreneurs with Prototypes

February 28 2012  |   leardonsolutions  |  All Posts, Business Tips, Product Design, Product Development, Prototyping  |  Comment

Leardon Solutions, Business tips, Product DevelopmentEntrepreneurs who are building a company around a product idea and are following the proper steps of product development typically have a prototype built. Of course, it is a natural part of innovation to build a prototype but sometimes these prototypes are not used to their full potential. Here are five business tips for entrepreneurs on what to do with a functional and professional looking prototype.

1. Develop realistic cost models using the prototype design.
Developing credible financial plans is absolutely necessary for the entrepreneur to properly step out and launch their product into the market. When the entrepreneur has a prototype, enough information exists to develop realistic financial models. The prototype design will allow the team to work with suppliers to determine the expected non-recurring expense (production tooling, set-up costs, engineering expenses, qualification costs, etc.) and the total cost of the product (direct materials cost, direct labor cost, and indirect costs such as support labor, distribution, and shipping). These are important inputs into the financial model that are used to accurately portray the long term financial forecast.

SCORE, a non-profit entity that provides business advice, has many good profit and loss and cash flow templates that can be used to develop these models. If an entrepreneur is seeking investment to take their product into production, a three-year cash flow statement will be important to determine the amount of cash needed to build the company.

2. Demonstrate the intellectual property for potential licensees.
Entrepreneurs typically protect their product idea by filing for intellectual property such as design patents, provisional patents, utility patents, copyrights, or trademarks. Many times, the goal is to “sell” this intellectual property to licensees in return for a small percentage of sales and let the licensee handle all the manufacturing and distribution. This is convenient since these licensees typically already have factories and sales channels in place. The prototype is a great method of demonstrating the intellectual property to these potential licensee.

3. Include the prototype as the centerpiece for investor presentations.
An article in Entrepreneur Magazine confirms that professional prototypes will help an entrepreneur describe their product to investors. When you are up in front of potential investors, a great looking and functional prototype can be the centerpiece of the presentation and can more effectively describe the product than any words on a presentation.

While a prototype is essential in this presentation, remember that it is also necessary to be working with a great product development team. Investors not only invest in the product idea, they also invest in the team. Always be sure to have the right people on your team.

4. Receive feedback from target customers, distributors, buyers, and retailers.
A prototype is a great tool to get valuable feedback from all potential customers. These customers not only include individuals that might purchase the product, but also distributors, retailers, and buyers for retail chains and catalogs. Put your best foot forward with an excellent looking prototype and absorb the feedback received. Try not to go on the defensive when bad feedback is received. One trait of a good entrepreneur is to find, admit, and correct mistakes or issues in your product.

It is also important to show your prototype to industry influencers or thought leaders for feedback. Not only do these individuals have great insight to the trends in the industry, but they can indirectly influence others to purchase your product.

5. Validate the idea on crowd funding sites such as Kickstarter.
On crowd funding sites such as kickstarter.com, creative companies offer unique benefits or pre-ordering opportunities to individuals who pool their money to help support the effort of a company. In essence, these crowd funding sites are not only a good way for an entrepreneur to get the financial resources to manufacture their product, but also a great way of validating their product ideas. When product description, pictures, and videos of the functioning prototype are posted on the crowd funding websites, it allows potential customers to evaluate the idea and determine if it would be worth ordering. If the idea is fully supported, not only does the entrepreneur receive the funds to start manufacturing but also validates that the idea will actually sell once available.

Need more information? Please contact us with any questions or contact me directly at joseph.donoghue ( at ) leardon.com

Tagged , , , ,
  • Follow leardon on Twitter

  • Subscribe to our newsletter