Eric Ries's book Lean Startup famously promotes the "Minimum Viable Product" as a way for startups to think about how to spend limited resources to get a product out the door. But now, seed-stage venture capital company CincyTech is looking to help companies do even more, by asking them to do even less. At the same time, CincyTech is hoping this will lead to stronger startups--and better investments.
CincyTech's Bob Gilbreath, entrepreneur-in-residence at the public-private partnership, told me the fund started six years ago with a focus on helping startups get off the ground and to the first stage of venture capital support (Series A). "We typically provide grants for very early-stage ideas (around $50k) and lead $250k to $500k investment rounds of pre-institutional capital. So far, we have invested $110 million in 30 companies," he says. "While we are focused on creating companies in the Cincinnati-area, we are increasingly drawing attention and funds from larger coastal regions."
What CincyTech is trying to do, with help from Gilbreath, is create a test that helps identify promising startups even before they create that minimum viable product. This saves investors and companies time and money. "I call it the Minimum Viable Concept Test, or MVC Test for short," says Gilbreath. "Before a startup builds a prototype or beta version (i.e., minimum viable product), I work with founders and investors to flesh the core idea into a visual representation of the idea--or a 'concept.' I then use a nationally representative consumer panel to expose the idea to a large group of consumers in the company's target audience. The results are benchmarked against a database of other consumer digital service concepts that I have tested, which helps identify strengths and opportunities for improvement."
If you were thinking this sounds like something right out of the marketing labs of Procter and Gamble, you would be correct. Gilbreath's career includes an MBA from New York University's Stern School and a long stint at Cincinnati-based P&G, testing products like Febreze and Swiffer. Gilbreath says, "I was able to put my knowledge to use in launching new products for Tide that led to record sales, and launching Mr. Clean Magic Eraser." After leaving P&G, Gilbreath joined Bridge Worldwide (now called Possible Worldwide, a WPP agency) and wrote The Next Evolution of Marketing.
After seven years, Gilbreath felt an entrepreneurial pull and joined CincyTech to focus on the growing number of consumer digital services startups that they are seeing. "A lot of what I'm doing is working with founders who have strong ideas and knowledge but require help with the consumer marketing and strategy fundamentals that I have been practicing for the past 14 years," he says.
The MVC test helps bring consumers right to companies and yields quantitative data. The data can be analyzed, and companies can see which features potential users of their products like the most. "As a result, investors can make smarter decisions about which companies to back; founders get incredibly valuable insights that can make their services better, earlier; and both founders and investors can have more productive, strategic discussions without relying on one person's gut opinion versus another's."
Gilbreath cites the famous e-mail exchange between investors Paul Graham and Fred Wilson about Wilson's turning down an investment in Airbnb because, he said, "Our two junior team members were enthusiastic, the three 'old guys' didn't get it."
Investors often ask themselves if they would use a product, or if their wife or kid or friend would. They may even ask industry experts. But not everyone lives in the world of an investor, according to Gilbreath, and industry insiders may not see the next big thing coming. So he is bringing hard data, and a survey methodology typically used by very large consumer brands that has the potential for increasing startup success. His vision is a powerful one: "If it can help increase the startup batting average by just a few percentage points, we might just create millions of jobs and billions of happier people."
Will researching concepts before creating those minimum viable products lead to more successful startups? Or do working products, mistakes, learning, and iteration do a better job? We'll be watching for the data. Let us know your opinion in the comments.