The first step to any business plan should be to clearly identify and articulate the problem.
I’ll walk through our approach using one of our platforms, Fundable , as an example. Fundable has grown to be the largest business crowdfunding platform on the Web, but it didn’t get there overnight. It took a lot of work starting with identifying and tackling the right problem.
I’m a firm believer that you’ll build a great business if you are passionate about the problem and the solution. That passion will most likely stem from something you already love. Just be careful that you recognize this as a starting point, not the end.
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Fundable Example
As a founding team, we knew the problem firsthand around raising startup funding. As this was a pain point we’d felt many times during our careers, we all felt pretty passionate about the topic. |
You need to make sure that others feel the same pain that you do. If not, this should be your first indication that the problem you are solving may not be all that big (aka “a small market opportunity”). This is the first of many tests around market size that you’ll go through during the planning process.
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Fundable Example
Our CEO spent countless hours meeting with entrepreneurs in a variety of small and large group forums to hear firsthand their fundraising challenges. This provided us context to fill in our knowledge and experience gaps. That knowledge coupled with the continued growth of Angel investor and the knowledge that over 500,000 new businesses are formed every month helped us confidently conclude that we were in a space that is big and still growing. |
This one feels a little academic (“screams Root Cause Analysis”), but it is useful down the road as you define, refine, and build your solution.
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Fundable Example
There are a lot of things broken in the startup funding world but in order to keep this simple, I’ll focus on a few that we zeroed in on. For starters, the most publicized way to get your business funded (Venture Capital) is the least accessible and realistic for a most of the startups out there.
> Root cause #1 - the average entrepreneur is misinformed and led down an unrealistic funding path.
Secondly, most startups don’t have an angel investor network at their disposal.
> Root cause #2 - the average entrepreneur doesn’t have the right (or enough) access to funding.
Lastly (at least for this article), there are businesses started everyday that will yield good returns, but not create enormous wealth.
> Root cause #3 - there aren’t great fundraising outlets for “main street” businesses beyond the traditional small business loan.
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Every problem or challenge creates consequences for those who experience them. Identifying these consequences and delivering better outcomes for the user of your product or service will drive adoption and client happiness.
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Fundable Example
The consequences of the problem we were trying to solve are very clear and well known to many. The biggest being that 90% of startups fail and a vast majority of those will fail due to under capitalization. |
Current solutions will help you tailor your approach to deliver the best possible experience to the customer. Remember, existing solutions don’t have to be elegant or all that beneficial. What is most important is that current people experiencing a problem view them as ‘solutions’. This will drive insights into your marketing and outreach down the road.
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Fundable Example
This is really interesting. In doing the research we found that a growing number of businesses were turning to crowdfunding to help fund their business. This new trend, while not the only solution, ended up being one that we latched on to with our business model because at the same time the JOBS Act was about to shake up the very old and very traditional way that equity fundraising could be conducted. |
The Fundable Problem Statement.
Raising funding for a startup is hard and the challenge is felt by millions of entrepreneurs. In fact, over 500,000 new businesses are started each month with many of them requiring funding. Access to funding is difficult because many entrepreneurs don’t start their journey looking in the right places and ultimately become dejected. Others simply lack the access to robust angel investor networks or find that the traditional small business loan really doesn’t work for their business type. If a business fails to raise the capital it needs to thrive then it will face the outcome that 90% of its startup brethren do - it will shut down before ever really getting off the ground. No one has tackled this market with a modern and innovative product offering geared toward startups of all shapes and sizes.
There are plenty of them, but how about we go with this … your problem isn’t necessarily a problem that everyone else has. It is just that - your problem! You should always make sure that you do your diligence in making sure your product or service won’t end up a solution without a problem. I’m confident that the approach I’ve outlined here will put you on the right path and prepare you for future success.