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#startup funding ep 4
Purewater: The Brilliant R&D Project
The Pitch
The city was Bengaluru, and the atmosphere around the table electric. Faces flushed with excitement, the hardened angels stared at the founders of Purewater in awe. After all those so-so start-ups they had been listening to, this was the real thing. They almost jumped over each other
But hang on. We're getting carried away. Let's look at the business, or rather, the product, for that is what it was. It was a product designed by two young engineers. And it could purify ordinary tap water and make it safe for drinking.
Aha! Now you're etting the picture. But here's the killer: This product was substantially cheaper than any of the other, more established products in the market. And could, therefore, be installed even in lower-income households. Not just in cities, but in villages too. Just imagine-finally someone had a cost-effective solution for creating safe, potable water. Could India possibly ask for anything more?
So you get the idea. you begin to realize why the angels around the table were so excited. The engineers among the angelsquizzed and questioned the young founders repeatedly, and were quite satisfied with the solution. At the moment the company was in pilot mode and manufacturing would ultimately be outsourced. That made sense-after all, the key was the design. The team had even applied for a patent.
Of course, there was the issue of generating sales, but the founders clearly said they would appoint distributors. Which made eminent sense, since they were planning to go pan-India on a massive scale. So a couple of deal leads were appointed-these were members across the table who were willing to study the project and its viability in more detail.
The deal leads spent time with these youngsters, studied the business model in detail and came back quite satisfied. This is a gold mine, they said with a quiet smile. With drinking water being such a massive issue in our country, these guys cannot go wrong. And they have a good, workable design. However, what is most important is that they hit the ground running and establish themselves quickly in the market. That's the only way to keep out copycats. And so the youngsters were called back for one final discussion. But this was felt to be a formality and most people in the angel network were simply itching to get their hands on their chequebooks.
Now, as the young founders trooped into the room for the meeting, a keen observer would have noticed that they were, if anything, even more excited than they were during the first meeting. And the reason soon came out. We are now working on our next product. This one will be a lightweight, portable water purifier-so you can actually carry it with you when going out of town. No more axpensive bottled water when you are travelling, they blurted out.
And they were grinning from ear to ear, just waiting for the applause. There was stunned silence in the room. What about the existing product?
'Yes, of course that's still there. But this will be the real thing just imagine what it can do for travellers.
"What about the distributors you were to a appoint?"'Yes, we do plan to appoint them once we have the product out. That's just a matter of a few months." 'A few months?' one of the angels exploded. You mean you s pora
haven't done it?'
'No, but that's easy. It will be done.'
The battle-scarred angels looked at each other. Slowly they out their collective breaths. Chequebooks and pens went back int their jacket pockets-figuratively, of course. It was such a pity. Grea product, huge market, phenomenal timing, but...
One of the angels put it succinctly. 'Boss, these guys have turned it into an R&D project.'
The angels nodded and quietly said goodbye to the millions they had been planning to make. And the Jaguars they might have bought. And the youngsters went back to work on their R&D project. No funding for them.
Analysis
Dear reader, you probably don't need to read this analysis. You must have figured out what went wrong with this potentially wonderful story. That's right-if you examine our PERSISTENT model, this project ticked perhaps all the right boxes. Huge PROBLEM waiting to be solved, massive SIZE OF THE MARKET, no problem with SCALABILITY-they could easily tie up with a low-cost manufacturer-very INNOVATIVE solution, etc.
All the boxes but one. Perhaps the most critical one. Namely the TEAM. These guys were good techies but they had no business sense. They had fallen in love with their own product and their purpose seemed to be to create newer and newer products, rather than taking them to market and scaling up the business. And, by the way, this is a very common phenomenon with techie-driven start-ups.
What's the solution? Simple. One of the founders must have a business orientation. If not, the founders need to rope in someone at the CEO level who understands and can drive business. In ourexperience, far too many promising start-ups have died an early. unnatural death simply because it was driven by techies with no clue about business.
Don't get us wrong. We are not saying techies cannot build great businesses. Many terrific businesses have been built by engineers, computer scientists and the like. But someone with business sense needs to understand and drive the business-that's all!
The Impact of the Coronavirus or Any Other Crisis
Purewater is the kind of business that everyone dreams of starting. Simply because it is immune to any crisis. Whether it is the coronavirus or the dot-com bust of 2001 or the global financial crisis of 2008, this kind of business cannot and will not be impacted. Yes, there may be a temporary delay in funding, but ultimately you'll get your money.
The simple message, therefore, is this: Look for businesses that
are crisis-proof. And you'll get your money sooner or later.
Finally, let's look at the PERSISTENT approach as applied to Purewater
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