Would an angel invest in your new idea?

English: Sodas and soft drinks at a Supermarket
English: Sodas and soft drinks at a Supermarket (Photo credit: Wikipedia)

Reality strikes. What if my new idea for a product or service isn’t good enough? Have I come up with something that the market will want? How am I going to make this new business work?

Coming up with the spark of a new business idea is exciting. It’s when your creative juices are flowing and you are in a generative stage. For you, your new idea is going to make a big change in your life and to your bank balance. Easy Street has arrived.

When you’ve completed your new idea for a product or service or developed it into a prototype, you may reach a point which is like a “Valley of death”. This is where doubts set in. This is where you don’t know if you have the resources and skills to carry it through. This is where you could be so disillusioned that you want to pack it all in and move onto something else.

Yet all this questioning is good. It’s good that you have this problem. It’s very good that you are starting to test the strength of your idea.

This is where the angels come in. What I mean by this is, would your business idea interest an angel investor? If an angel investor had to look at your business idea or small business that you’ve already developed, would you be able to interest them?

The other day I came across some information from India where they were saying that there are more than 10,000 start up ideas thirsty for capital, yet they are just about 500 to 800 “angels” in India to fund them. In a way, this is a good reminder of how important it is to know that you have put your new business idea through some critical hoops to determine how viable it will be.

What sort of due diligence have you done to determine how promising your new idea is? Are you convinced of your own story as the passionate founder?

Even though you may have heard an initial interest for your new idea it’s important to consider the hard metrics such as market size, potential growth rates and your business plan. Does your business idea have the potential to scale up?

You may have received initial interest in your business idea from test consumers or customers but does that mean that the market is big enough to support your potential new product or service? It’s also important to consider the stage of your potential market. If you take a market like soft drinks, for example, you would know that the trend is towards healthier soft drinks with less sugar or no sugar and all. With governments and cities cracking down on sugar intake because they have to suffer the financial consequences of peoples’ ill-health, the trend is beginning to move away from highly sugary drinks. But it may be too early for a start-up to come up with, for example, a non-sugar product without spending heavily on marketing and advertising. Education of consumers is not cheap and can quickly empty the bank account of a small business.

You may be able to work a new non-sugar soft drink through clever marketing but you really have to know what you’re doing. For example, a small beverage manufacturer came up with sugary drinks based on old-style traditional soft drink recipes. This business started out by selling to small cafes and convenience stores and hung in there for well over a year before it was able to penetrate the supermarket chains. Unless you know what you are doing in this field, it is going to be, not impossible, but difficult. This is why so-called “domain expertise” is so important. It’s valuable to have prior experience and knowledge of and industry that you plan to go into.

As the angel investors say, your plans may be castles in the air without good execution capability. This applies to any new business idea – an idea is only an idea until it is implemented or executed and becomes a reality. Your own credentials and that of your team are critical because ultimately your success will depend on your own experience and qualities as a business person.

Angels will fear to tread any where near your new product or service unless they know you have the capability and courage to pull it off. Yet if you are able to put faith in your business acumen and expertise you may be able to soar where “angels” may even want to get involved.

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