software, investors, angel-investorsI worked in the past as an IT manager, overseeing the development process of a distributed IT-infrastructure management system for an angel investor. A system was developed, and is now out of beta. Both the investors and the developing company never did anything to market the product, introducing it to potential license buyers with direct contacts.
Now, the company has been faced with financial problems and had to abandon the project. Ownership right has been legally transfered to my startup company. Because of that, I now have a product that I personally believe is able to gain a market share if marketed to the right potential buyers.
However, my current main business focus is on another, unrelated product that my company is developing.
What might be my best approach moving forward with the product rights I inherited from previous company?
I’m thinking I have four main options:
Is there a market where I can present and try to sell an entire product?
Where would I look for those?
Then perhaps try to market it myself after I gain a foot on the market and money with the main product of focus my company has at the moment?
You need to be very hard-nosed about this. Your working assumption is that the product’s greatest potential value was to the developing company, and if they have access to funding but have abandoned the project, prudence tells you not to put your company at risk by over-investing.
On the other hand, you have an opportunity. You have an asset that could be valuable, but it’s rusting: every month you sit on it, it’s going to be worth less. And the long sales cycle that’s typical in your industry makes this worth.
Here’s what I would do.
First I would create a capability list. By capability I mean a feature or a cluster of features that translates to solving a single problem within infrastructure management.
Then I would draw up a list of competitors, and do a rough job of rating them against each capability.
Look over what you’ve done, and find one, two or a very few places where you see that you have a potentially strong value proposition. If you have choices, prioritize the cases where a customer would see significant value fast.
Finally, for your best case, create a sales page, focused extremely narrowly. Invest a modest amount of money in PPC, and see what you generate in terms of enquiries and other measures. Any enquiries you should treat as customer development. Engage the prospect based not on the total system you have, or on their wider need, but on the narrow description.
You’re likely to find out one of three things.
Possibly, you just won’t get any serious interest. Chances are, that’s going to suggest you mothball the project.
Or you may find that you get interest, but you can’t keep the focus narrow. That’s a cue to find an partner - most likely a small but credible enterprise solution provider who isn’t tied to a competitor. You can come up with a deal that would be attractive for them while avoiding any unpaid development work for you.
Or if you’re lucky, you may have found a route in to the market based on a more compact set of capabilities than you have on hand, and the beginning of understanding why customers might value that. If that happens, you have a startup opportunity, which you could pursue alongside other activities, or standalone, or as an empty shell to recruit a “late stage founder” team to take forward.
There’s also another way to look at this. Sometimes an application or utility can be re-purposed for specific niches. Without knowing very much about what you have, it’s impossible to say if your software product could be modified and marketed that way.
But you may be able to find someone that can modify the code to create a “new product” with little coding to meet the specific needs of a market niche. For example, let’s say you had a product that converts and transfers data from many different sources to many different targets. It also validates the data post transfer. Rather than find a company or person to buy into the entire product, sell the rights to use code from the application to create new products.
The medical industry is especially prime for that right now. In my example, you could sell the “engine rights” (core code - usually nothing to do with the interface) to a company that creates a data transfer product that meets the new HITECH and HIPAA regulations. Products like that usually generate much more income than their generic counterparts. They also are much more likely to have a higher recurring income stream because of maintenance contracts and, in the case of medicine, changes to government requirements.
You could resell the rights to the core code over and over again and even achieve “Powered by” status where as part of the licensing agreement requires the interface to display a “Powered by” message somewhere conspicuous.
Many video games are done that way. The old Wolfenstein core engine created by ID (please don’t get on my case if the names are wrong!) was used for many years after it was first created in other games (http://en.wikipedia.org/wiki/Wolfenstein_3D_engine).
If you think you have to spend a lot of time keeping the core code updated to accommodate cutting edge technologies and systems, you’re thinking like most people would. My experience is that the core code is usually a good couple of gens behind the current technologies. The reason is, it needs to be something developers can count on not changing much. They’ll have enough work to do for their own product(s).
If you can go this route and you have a product that the market niche needs, is stable, and makes economic sense for a company to license it from you, that, I think, is the best way to go. You get the longest use of the code without having to put a lot into it (again, assuming you have good code), in fact, you’ll probably end up removing stuff. With minimal work time needed from you (because the coding and really techy stuff can be outsourced), you can create a nice revenue stream for your company.
But that’s my humble opinion … :)
1, 3 and 4 are really the same answer. Choices 3 and 4 are dream lands where someone else picks up your ball and runs with it, with no effort from you, then you collect. Not going to happen. Since you are preoccupied with your current project, your question is really how to sell this software with little effort. In other words, is it sellable, and how much effort will it take.
So what you have ahead is an exercise in market research. Ask yourself who would sell it, determine if they buy outside ideas, then contact them. Make a very wide list, use your contacts and start very informal. Try to talk to alot of different people. Frankly, I am not optimistic because what you describe is difficult even for someone giving the task full time.
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