If you’re building a product or service people are familiar with, your biggest challenge is competing for market share against established giants. However, if you have a brand new idea, you have taller obstacles to overcome: You have to get your audience to understand your product, see a need for it and risk purchasing it, all while staying financially afloat.
I know from experience. In the fall of 2011, a small group of investors and I acquired a startup called Emerge Clinical Decision Solutions. The company engineers medical software that aims to streamline the physician’s workflow, making information usable at the point of care.
Emerge had an inventive foundation of creativity and ingenuity, but it needed stronger funding, structural support and the right marketing for the product to fulfill its purpose. That’s where the following five challenges of being the first to market came into play.
Related: Reinvent a Product, Not the Wheel
Unearthing capital to survive the journey from “unproven” to “proven” concept. In Emerge’s development stages, the original investors ran out of money and turned to us as white knights. But with an unproven idea, there was still a long road ahead and the potential of needing more capital. We had to be prepared for series B equity, and to lay the groundwork for series C funding as well as build optional lines of credit from our white knight investors. It was all about looking ahead while minding our current financial footing and establishing relationships with strategic partners.
How do you sell a product or service no one knows exists, often for problems they don’t know they have? Emerge runs with electronic medical records (EMRs), but a few years ago only 25 percent of doctors were even using EMRs. It was like trying to sell email before anyone had the internet. Our market was limited, but we had a vision. Doctors began to see what EMRs could do with additional technology for efficiency and compliance. Emerge has a product that enhances something doctors are already using. Our product had to wait a few years for the medical IT world to catch up specifically in the utilization of discrete data in the EMR.
How do you prove how good something is when there’s nothing to compare it to? Doctors have only recently used technology to manage patient data. This makes it difficult to get specific comparisons on the ways new software is having a positive impact on patient care. When there are no previous statistics, it’s hard to demonstrate improved results. Independent studies help, but so does building a core client base who will discover and share benefits with the rest of your audience. Your early clients are not customers, they are early adapters that must understand that the solution is a work in progress that will only get better with their input. Or to put it another way, you have to find the potential customers that believe there is a better way.
Pinpointing fair market value is essential. When you are the first company to offer something new, how do you decide what it’s worth? If your product is too expensive, it will be impossible to sell. If it’s undervalued, you may wither in the financial valley of death. Finding a cost people are willing to risk on an untested product while keeping your company alive is the biggest challenge.
The reward for your success is a competitor coming out of the woodwork to crush you before you can gain scale. Once you’ve overcome the first four hurdles, guess what? People are going to try to copy you and your niche market becomes mainstream. Larger companies will attempt to figure out what makes you special, duplicate it, and scale it faster than you can. Not every pioneering company will survive, but those who hold tight to their position and fight for growth can do incredible things.
Who knows? Those who survive can make the world a better place. You may even save lives.
Copyright © 2013 Entrepreneur.com, Inc.