Taking an innovation to market

Senake Atureliya qualified with an electrical engineering degree from Southampton University in 1986. Various subsequent management and sales roles enabled him to build the knowledge and contacts needed to set up his first venture some five years later – designing and manufacturing production line machinery. Senake shares his top tips for taking an innovative idea to market

"After growing, finding investment and selling that business, I ran a consultancy rolling out cutting-edge business process automation across Europe.

"My current business – Pie Finance – helps innovators and entrepreneurs progress from ideas stage thanks to an innovative peer-to-peer funding solution. So what have I learnt about overcoming the challenges innovators face in taking an innovation to market?"

1 Reduce the risk of disclosure/competitive edge theft

"Many innovators/entrepreneurs see this as the greatest risk. There are differing views on protection. The book Crossing the Chasm describes one of the most effective ways to prevent 'idea theft', it advocates rolling out the product/service to customers who are suffering considerable loss by not having it, which means it can be directly sold without advertising to a small number of customers.

"High margin sales can generate revenues required to launch in the mainstream market, while minimising risk of detection by potential competitors. Other solutions include: seeking intellectual property rights (eg patents); use of a ‘decoy’ product to build a potential customer and investor database; and non-disclosure agreements."

2 Adapt to market developments

"Mature, saturated or diminishing markets are the most stable. Profitable, growing markets move fast, making an idea just a starting point, which is why it’s difficult to sell or get investment for them. New solutions to niche problems, competitors and consumers in the space can change daily, meaning even a well-established product/service can rapidly become obsolete. You must try to react quickly and stay one step ahead."

3 Fill gaps in your plan

"Finding holes in ideas is frequently significantly harder than generating ideas. You need in-depth knowledge, whereas, most individuals create ideas by trying to find solutions to a problem. Sticking to what you know – technically and commercially – helps, but if you must venture beyond, try to find trustworthy people to fill any gaps.

"Bootstrapping is the best way to retain control and profit. Grant finance is worth securing, but usually requires match funding. Debt finance (eg bank loans, overdrafts and asset finance) are the next best way to raise funds, while retaining all equity. True, it’s hard for start-ups to secure debt finance, but those with a track record could benefit from the Enterprise Finance Guarantee scheme.

"Business angels can also help, but only 3% of propositions get funded and you must meet stringent criteria: very high returns on investment (x10 to x30 over five years); proof of demand (sales or forward orders); and a proven management team.

"Peer-to-peer resourcing (ie getting people and other things in exchange for equity or revenue shares) without payment up front is another option.

"Next to protecting your idea, protecting your investment must be your main priority. Giving away a share of the rewards is painful, but it’s well worth it, because failing to spot the gaps or not having adequate resource to overcome threats may mean you lose everything you’ve put into your idea commercialisation."

4 Avoid loss of control – and your business with it

"Control, rewards and recognition are separate things. Identify what you want in return for your input. An investor’s primary concerns will be protecting and maximising their returns – which could involve them trying to dilute or force you (and possibly other investors) out. To combat this, don’t let your business get desperate for cash. Maximise your bargaining power by agreeing an alternative plan B (possibly C, D and E, too) at the outset.

"An industry guide to equity sharing is that a third should go to the person with the idea or IP, a third to the management team and a third to the finance providers. The concept of equity for very early stage start-ups is flawed, I believe. As dividends on preference and ordinary shares are paid out of profit, this introduces a layer of risk for minority stakeholders.

"Profit can easily and legally be 'massaged' – revenue cannot. For entrepreneurs, offering equity means all external early stage input burdens the whole business on an ongoing basis, thereby discouraging adequate resourcing. With these disadvantages in mind, I believe it’s best to try and acquire capital and resources based upon on a premium fixed price paid out of a share of the revenues that they help to create."

To read case studies on how other entrepreneurs brought their business ideas to fruition, see our case studues and profiles in the Resources box on the right.

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