My brain was in an explosion this afternoon, whilst accompanying my family and a friend on a shopping trip to Ellesmere Port, off M56. This all started due to two conversations I had yesterday. I linked the two conversations with my experience of ebdex and edocr and devised a methodology for launching a new business for £25,000. For this to work, I need two ingredients:
- The domain expertise must be present in-house. Ideally, the proposed startup CEO must have this expertise and must be passionate about it.
- It must be easy for me to understand quickly and relate to a pain I have, so that I become the customer.
Then it is my task to quickly evaluate the possibility of its potential:
- It must appeal to viral marketing
- It must be suitable for a free and fee charging pro model
- It must be simple to understand, if not, then find a way to simplify it
- It must be suitable for web 2.0 treatment, if not, then find a way
Having done that, then quickly sketch out the proposition – real fag packet stuff, complete contradiction to MBA strategising. The next stage is to work out whether it will meet the following criteria:
- Can the alpha product be developed for under £10,000? Alpha would be the product that will be offered free forever.
- Can the beta product be developed for under £10,000? Beta would be the pro version offered at a no-brainer fee, allowing revenue generation.
Allocate further £5,000 for evangelising and administration. The £20,000 development budget does not allow all bells and whistles product, but a product that works and able to attract revenues. The bells and whistles can come second after concept is proven with Alpha and Beta. So the total cost to launch is £25,000.
As a new entity the business will have zero value, but taking future growth potentials into consideration, it is not unfair to assume a valuation of £100,000. This gives the investor a 25% stake of the business and possible role of Non Executive Director or Non Executive Chairman. The business must be able to generate significant value within 2 years to provide an exit for investor. What return the investor would get is anybody’s guess, but expects to be far higher than an average investment. Of course the whole thing could go flop which applies to any investment whether you invest into a startup of a FTSE100 company.
In this scenario, I see my role as Doer and never as the CEO. As the Doer, the role of COO is more appropriate with 9 to 12 months part-time role. I would also develop the product through my new company evigon, which in turn will manage resources from my ever growing Northern StartUp 2.0 community. Or yes, for this service, I would also demand 25% of the company. The CEO would be given 50% of the company, perhaps mixture of options and equity.
What is the downside to all this? Yes, the investor could loose £25,000. I will not be able to recover my investment (time and energy) through sale of 25% equity. The same could apply to the CEO.
Above is given for guidance only, as no two circumstances are the same. Could above be applied to e-invoicing/EIPP? Yeap! Don’t be silly, when OB10 spent $30 million, how could you launch for £25,000? Yes, it is possible. Of course, you should not compare like for like, but this can be done. If you are a developer, you can in fact do this with zero cost as you would be developing it. But what I stated here include paying for development time.
Anyone out there got multiple of £25,000 to test the model? Here is a real test for you – the cost of development and running of edocr to date, excluding time costs is less than £1000. This was achieved mainly due to in-house development capability. If the model described here was applied, it would certainly come within the £25,000.
In case you are wondering, there are others out there thinking the same. And all this work could be done in the UK without having to outsource to India, Russia or anywhere else.