IEEE Power Electronics Magazine - December 2014 - 35

Entrepreneur Viewpoint

by Deepak Divan

Validating a Business Model for a
Minimum Viable Product

s an entrepreneur, you have gone
through the challenges of outlining a business opportunity
and have understood your target customer's unarticulated needs. In addition,
you have done the market research and
analysis to define a preliminary market
requirements document leading to a
preliminary product requirement document. These are relatively simple processes that lead to a minimum viable
product (MVP) definition. The intent is
to move rapidly and frugally to a point
where you can test your product and its
fit against the latent market needs as
well as understand whether your original business concept can make money
at the scale envisioned or whether it requires changes in direction, strategy, or
technology.
This is a very challenging time in
a start-up, with many opportunities
to make mistakes. Remember, the
idea is to show not only that the product works but that it delivers value to
a large potential market in a way that
can be monetized by your start-up. In
fact, this phase must bring increased
clarity on the value that your solution
brings to your customers. In essence,

In subsequent columns, the columnist will share learning and
experiences, as well as discuss
challenges of obtaining venture
capital funds.

Digital Object Identifier 10.1109/MPEL.2014.2360360
Date of publication: 18 December 2014

it must have answers to questions like
what are the truly defensible advantages that your solution can offer against
what the customers are using today?
What are the compelling reasons for
customers to switch to your solution,
and how motivated are they to do it?
Likewise, what is the risk to them, and
what is the adoption process within
their organizations? In addition, what
is the timeline over which they can purchase your solution, at scale? Finally,
perhaps the most important question,
does this limited set of customers represent a large market opportunity, or
do they constitute a more limited niche
market that may be interesting technically but cannot scale commercially?
A common mistake during this process is to be so convinced that you have
the winning solution that you stop listening to the signals the market is sending
you. Clearly, the market does not know
exactly what is needed-this is a white
space after all-but your test customers
can respond to adoption concerns and
can help you better understand what
the unintended consequences of your
solution might be. It is your job to take
that input in the context of your vision
and see if your MVP can deliver on the
value promised. Furthermore, confirm
that the solution does address a serious
problem and/or a compelling need.
Fundamentally, at this point, you
have to be sincerely honest with yourself in assessing if your vision holds,
needs to be modified, or if a complete
pivot is needed because the MVP and
the original vision do not translate into

December 2014

a scalable business opportunity. If the
need to pivot is identified after significant funds have been spent on a vision that has been sold to the venture
capitalists or angel investors, it raises
doubts about the abilities of the startup team. That is why this stage must be
reached with a minimal team, a very
low burn rate, and a fail-fast and failoften strategy and should be positioned
as an integral part of how a start-up in
a white space has to operate.
Part of the exercise of deciding to
move forward involves a realistic risk
assessment in terms of technology
gaps, market size and access, ability to
scale, gross profit margins achievable,
competitive threats, and access to sufficient funding at acceptable terms.
Once the MVP and the value delivered
into a specific market are validated,
it is time to build a business plan that
sets out to implement the now invariably modified vision, to raise funds,
and to set about developing the product and the company.

About the Author
Deepak Divan (ddivan@varentec.
com) is an IEEE Fellow and past president of the IEEE Power Electronics
Society. He is the cofounder, president,
and chief technology officer of Varentec, a company focused on grid edge
control and funded by the clean-tech
venture capital firm Khosla Ventures
and investor Bill Gates. Prior to launching Varentec, his third start-up, he was a
professor at the Georgia Institute of
Technology from 2004 to 2011.
 IEEE POWER ELECTRONICS MAGAZINE

Table of Contents for the Digital Edition of IEEE Power Electronics Magazine - December 2014