Space is cool. But profit is hot.
Over the last decade I’ve reviewed hundreds of space industry business plans. And most of them are talking about the wrong things. I can’t tell you how many times I’ve seen entire business plans where the main idea is nothing more than “Space is cool! Give me money.”
Yes, space is cool. Yes, your technology is probably also cool. But unless you’re Justin Timberlake, being cool doesn’t have much value. The whole point of a business is to create value, and that’s what investors want to hear about.Too often, business plans spend 90% of their real estate on how they solved their own problems and barely even mention how they’re solving their customer’s problems.
The reality is: The only thing that matters is your customer’s problem.
Solving your problems — how your technology works, how you’re going to manufacture it, and who you’re going to hire — doesn’t bring money through the door. Investors want to know about your CUSTOMER’s problem. Your customer’s problem is what investors will give you money to fix. It’s the pain point that will entice your customers to give you their hard-earned money. Investors want to know about this problem, or as it’s otherwise referred to — your opportunity.
How are your customers currently solving this problem? Can you do it better? Cheaper? Faster? How will you make their lives easier and less painful? What benefits does your product have over current solutions? And how much money are your customers willing to pay you for those benefits? Far too many of the business plans I review have omitted or minimized this basic discussion of how their business works, often referred to as the business model. This should be simple:
“X number of customers have a huge problem. They’re currently paying Y dollars to fix it. My solution is better because is saves my customers time, money, and heartache. We will make Z dollars in profit per product and expect to sell N products per year.”
That’s it – that’s all the data you need to develop a coherent business model. Yet most space entrepreneurs minimize (or completely forget) this basic business equation in their elevator pitch, investor interactions, and business plans. If you can’t coherently explain to the investor how you’re going to make money, why would they ever give you money? Getting your customer proposition right is the first step to getting your investor proposition accepted. Understand what your customer needs, and then be that. And I can tell you right now that it’s highly unlikely that what your customer needs is “a cool space company.”
So rather than fixating on the ‘coolness’ factor of your space-gadget, go find your customers. Get to know them, get to know their pain points, and figure out how to solve them better than current solutions. Understand your market, and understand how to market to them. And THEN go ask for investment.
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