Is paying for research to launch a new product worth it to help convince venture capital investors?
We are in the process of raising funds via a VC to take our new branded product to market. Our advisors have suggested we undertake some research to strengthen our case. However, I’m concerned about the expense involved and about the benefits looking at the brand can actually bring. How can we ensure we get value for money and a productive result?
A. Ian Hayes of Corporate Edge writes:
When putting together a business case it’s easy to assure a VC about easily definable issues, such as cost, profit and distribution. However the most important elements are the most difficult to predict. What’s the proposition to the consumer? Will the promise be so distinctive and compelling that they will choose the new brand over its potential competitors? Does the usage experience live up to its claim? Is the price realistic?
Anyone investing money into a new venture will need reassurance about these issues and more – particularly given the oft-quoted figure of only one-in-ten new products launched actually succeeding.
The only way to provide this support is to commission some form of research. You may need in-depth exploratory qualitative research to help you fine-tune your offer, but you’ll definitely need quantitative research to generate the numbers VCs like to see.
Firstly, ensure you put aside the time to write a clear research brief that can be condensed down to one side of A4. It’s far more difficult to reply to a 15-page tome, particularly if the objectives are buried in the depths of page 10.
Secondly, issue the brief to enough companies to give you a range of possible approaches and costs – between three and four is about right.
Thirdly, always meet the people who write the proposal. Research is a people business and its success will depend as much on the intuition and analytical abilities of the individuals concerned as it will on any fancy ‘black box’ method.
Following these rules will significantly increase the chances of the research you commission being clear, insightful and actionable. And it will be money well spent if it gets you the financial backing you need