So, you’re ready to turn your great idea into a business. Now what? Add these terms to your vocabulary and use them in your business plan, pitch decks, and in your communication with financial investors and industry partners!
The real MVP
MVP stands for minimum viable product. An MVP is a simple, functional version of your idea that can be tested in the marketplace swiftly. It is often essential to establish an MVP prior to industry collaboration so that partners can see your technology at work.
It’s important that an MVP prototype be relatively easy to make or duplicate because you will be testing it again and again until it works. Prospective industry partners are often eager to hear about the status of prototypes and the success they have had.
Before you settle on a terrific prototype, remember to make sure that your focus is on the end-user. Don’t be afraid to be specific! Unlike your business plan, which will no doubt cover multiple outcomes, an MVP can be clearly defined to test the needs of one audience. Be efficient and specific to a single hypothesis to figure out if that hypothesis is viable.
TAM, SAM, and SOM
It’s important to know what your addressable market is when talking to both financial investors and industry partners. While the MVP should be targeted towards one audience, the research you do about any potential consumers will have to be both detailed and broad. This might sound like conflicting advice until you understand the three levels of an addressable market: TAM, SAM, and SOM.
First, any new company needs to consider their TAM, or Total Addressable (sometimes also called Available) Market. This contains everyone you would like to reach with your product or idea.
Following close behind is your SAM, the Segmented Addressable Market or Served Available Market. This is the subset of your TAM you will target first, most likely using the great new MVP you just created.
SOM, your Share of the Market, is the realistic portion of your SAM that you can reach, usually in the second or third year of business. Understanding your SOM forecast in and out is a great way to attract both financial investors and industry partners.
Is industry collaboration part of your startup’s development strategy? SeedSprint may be a good fit for your goals! You can learn more about seedsprint for startups here!