Product or Company?

As a mentor at MIT Venture Mentoring Service, I very often see entrepreneurs at the concept stage. One common issue I have found is that often they aren’t clear in their own minds if they intend is to create a product or build a business.

Often it’s one of the first questions I ask them, because this basic decision will have a great influence on the myriad of other decisions they will need to make if they decide to build a business.

With all the tools available today to developers one person can develop an app or other product themselves, and fairly quickly, without much capital. And there is nothing wrong with that ambition. Products can be sold or licensed to other companies, that can take on all the responsibilities for making the product successful, including sales and marketing, customer support, maintenance and enhancements, and much more – freeing the entrepreneur to focus on creating new products or services.

The bottomline is: if you want to build a company you need to think as much or more about building your team as building your product and acquiring customers. And virtually all VCs will tell you that they invest in teams, not in products. (I believe Don Valentine is one notable exception to this rule.) The common wisdom is that VCs will take an A team with a B plan over a B team with A business plan, because plans seldom become reality and an A team can pivot successfully, a B team can not.

Organizational design, recruiting, and compensation plans are key to building teams and topics for another day.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

1 thought on “Product or Company?”

  1. Good point. I believe Dean Kamen almost always licenses – Segway being a notable exception. It frees him to go on to his next idea. I know another entrepreneur who only wants to build his companies to about $1m and then let others grow them. And then others want the full ride. Takes all kinds, but important to be clear on your goals.

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