A Couple of Useful Frameworks
If you’re new to commercializing your technology and building a company, there are some frameworks that have been around for a while.
In this post, I’ll discuss two of them. You ought to know about these—both for your own good and, well, to avoid seeming naïve. You’ve been working on your research and technology; now it’s time to start thinking like an entrepreneur and understanding the mindset of investors.
1. The Gartner Hype Cycle
There’s an interesting description of how technology is viewed as it comes onto the scene. It’s called the Gartner Hype Cycle. You can find a description of it at:
I won’t repeat here what it says—take a look. What are some important implications of the Hype Cycle?
It’s important to understand that investors are aware of the phenomenon. If they think that your technology and startup are at the peak of inflated expectations, they may hold off investing (or they may rush in and invest at a very good valuation for you). I’ve seen both happen.
If you’re in the trough of disillusionment, it will be hard to get any investors involved at a valuation you feel good about. If it’s generally believed that you’re in a growing market—the so-called slope of enlightenment—you have a better chance of finding investors who believe you’re investable. Another way to describe this stage is to say that a rising tide lifts all boats.
A future post will go into more detail about the Hype Cycle. It’s a useful—and fairly well-known—way of viewing technology adoption, and there are strategies you can pursue depending on where you are in the cycle.
2. The Heilmeier Catechism
In my book, I discuss investor checklists—lists of features investors want to see in ventures they’re considering for investment. Here’s an early checklist called the Heilmeier Catechism. It’s still useful today:
George Heilmeier was director of the Defense Advanced Research Projects Agency (DARPA) from 1975 to 1977. He developed this list of criteria for DARPA to use in evaluating proposals.
Take a look at the list. There’s a reason it’s still used after fifty years: it makes sense. It doesn’t map precisely onto the questions an investor might ask, but if you can answer these questions—and your answers are positive—you’re a long way toward having an investable startup.
Since DARPA can fund anything from small to very large (and sometimes secret) projects, budget size is not a problem—if the perceived payoff is in proportion to the cost. DARPA has funded such projects as GPS, the Internet, SIRI (in its early stages), and other important innovations.
Don’t expect venture capitalists or angel investors to have either the deep pockets or the national goals that DARPA does. Your investors will be looking to invest in you so that you can build a great company with a substantial liquidity event in the future.
Still, the Heilmeier questions remain a solid gut check for whether you’re really ready.
The Takeaway
Spend a few minutes with these two frameworks. Take a few minutes and look into these two frameworks. Give them some thought. Knowing about them will help you see your venture through the eyes of interested but not-yet-convinced investors.