Things were going great until that moment.
I was listening to a smart, articulate, and engaging MBA student at the Rice business plan competition last week, as he was presenting his pitch for a very intriguing science-based venture that would greatly enhance battery output from roughly the same materials input.
He and his teammate had related scientific degrees, and patents, and a lot of credibility. And it doesn’t take much to convince me that there’s a market for enhanced battery output in all shapes and sizes. Whether that’s more power per unit of cost, or more power per unit of weight, both are interesting.
And then came the problem. He said they didn’t actually need outside capital to make this go. They were going to go with it regardless. But with investment, he added, they could go faster.
He showed a sales forecast that got close to $1 million in revenue in the second year and just under $2.5 million for the third year. With investment, he added, they could hit the third-year number in the second year.
He lost me there. I tried to stay focused on the presentation but my thoughts wandered. Was he saying that because the rules of that particular business plan competition (and most others, by the way) required that all teams entered be seeking investment? So he and his teammates pragmatically established an investment offering to comply with the rules, hoping that they could with that change compete for prize money without needing the investment? Or was the team really undecided?
My problem was thinking how much better off these entrepreneurs would be if they could build that business as their own business, entirely owned by the teammates, without outside investment. As the song goes, God bless the child that’s got its own.
I do know that few businesses have the option that this one seems to think it has. Most businesses either fund themselves because there’s no other option, or get funded or never start because the startup investment is inaccessible. But once the assertion was made, once they’ve said they can get to a million next year without investment, it’s hard to put that out of my mind. Maybe they are simply naive. On the other hand, the technology side of it, the science, was very convincing. If you have a market, if you have something to sell, and defensible technology, that’s a pretty good start.
I did get a chance to have a talk with one of the teammates later. I told her about my reaction during the presentation. I hope that helps them in the future. I think that in general it’s a good idea not to seek investment unless you need it, and if you do, not to say you don’t.
People who need investors are not necessarily the luckiest people in the world.