Too many markets...I want to go into all of them!

Someone recently asked me the following:

"If what you're developing can go in many different products, but you need a product to select a market, do the market research, diligence, and even look for partners with experience in that specific product space...what's a good way to go about that, and still keep yourself open to pivoting in the future?   For me, say you can go into the personal app space, or the healthcare transcription space, or the commercial IVR space, or license technology capabilities, or any number of others, the initial people I'd want to reach out to to bring on board or help are all different for each."

Good question.  Unfortunately, there's no easy, quick solution.  As soon as you have your core product somewhat defined, you (or someone from your team) should be doing a comprehensive market analysis, which looks at all possible markets.  For each market, one needs to assess the market size, how difficult is it to penetrate, what are the margins, how much does your solution benefit them, etc, etc.  Lots of work here!  If you're lucky, you can get a team of business students to do this, maybe even for free, but the timing has to be right w.r.t. their course series.  Or, you might be able to find a business student to do an independent study project, again, for free.  Other options exist as well.  But, before you do any of this, you must have a list of proposed product features to help you define potential markets.

Sometimes, an easy, low-hanging-fruit kind of market is obvious, and that's often a good starting point, even though it might not be a huge market or perhaps not a high-margin market, but it could potentially bring in some early revenue.

Which market to target first?

My past posts have included discussions about the importance of a market niche and the importance of a product family (not a one-trick pony).  So, you've picked a niche and are developing a product family.  But how did you decide upon that niche?  Was it the largest one?  That would be a logical answer, but what if that niche requires much more money to develop and sell into?  What if that niche has a much longer sales cycle?  Be sure to consider all aspects of the niche you plan to target first.  The best one just might be the one that will provide the quickest revenue for you.  This is sometimes called the "low-hanging fruit."  Now that you have some revenue coming in from this niche, you can fund some other niches that might require more money to develop and/or have longer sales cycles.  Oh, and beware of niches that have seasonal sales cycles.

Compensate your advisors appropriately

Good advisors can be the difference between success and failure of a start-up.  Seek out advisors who have expert knowledge of your company's business and market (or some aspect of it).  And when you find one, make sure you make it worth his/her time to give you dedicated time.  If you're just starting up your business and know you still need to raise lots of money, don't offer your advisor 0.25% of the company vested over four years...there's just not enough upside for the advisor to justify spending any time with you, especially after one considers all of the dilution that is still to occur as subsequent financing rounds occur.  Two percent vested over two years is more appropriate.  Now, if you've already raised all the money you need to for a while and little or no dilution is foreseen, and you're close to revenue, then 0.25-0.50% over two years is more appropriate.  There are other factors that play into this as well, like what is the total projected upside for the company, etc.  Bottom line:  If you find an advisor who can provide great value, work with him/her to achieve a reasonable compensation package.