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DEVELOPING NEW BUSINESS IDEAS6

Typically, the ideas which entrepreneurs present to potential investors
are only partially formed and lack intrinsic value. The survival rate of
the typical business idea is very small: for every 100 ideas presented to
investors in the form of a business plan or proposal of some kind, only
between one and three usually get funded.

Helena Boas and Matthew Wootliff of Bodas, the lingerie retailer,
needed more than £1 million to expand their two-month-old business.
To win the necessary funding from business angels Pi Capital, Boas
focused her efforts on reshaping and moulding their idea into a really
attractive business opportunity. ‘The business plan was crucial’, says
Wootliff. ‘Helena spent six months researching and writing it. We did
everything from market research to stress tests.’ Their efforts paid off,
satisfying the requirement expressed by David Giampaolo of Pi Capital
that members seek to back a business, not an idea, and gaining Bodas
£1.1 million of capital.3

over valuing Eureka The new business that simply bursts from a

flash of brilliance is rare. Paul Burns reports Anita Roddick’s admission:
‘I know that everyone wants to think that it is like an act of God – that
you sit down and have a brilliant idea. Well, when you start your own
business it is not like that.’4 Peter Drucker goes further, arguing that
‘bright ideas are the riskiest and least successful source of innovative
opportunities. The casualty rate is enormous.’5

The importance of the ‘Eureka’ idea is often over rated at the expense of
an under-emphasis on the need for products or services which can be
sold in sufficient quantity to real customers to generate sustainable
cash-flows and profit. As James Dyson’s prototyping exercises
demonstrate, what is usually required is a series of trial and error
iterations, or repetitions, before a crude and promising product or
service fits with what the customer is really willing to pay for.

rushing headlong into action It is a frequent mistake to be so

fired up with your idea, so convinced that it is the best solution to a
correctly defined market opportunity, that your first instinct is to rush
to your financial backers or your managing director and ask for
immediate funds to realise the idea. After all, you tell yourself, analysis
paralysis risks delay and you have nothing to lose because if things go
wrong you can try something else.