This may be the question you are asking yourself, but is it the right one? Perhaps you should be asking, how do I bring my product to market sooner rather than later, while retaining as much equity as possible?
An idea is just an idea until it gains form, function and fans. To that end, building a prototype to prove your concept works, to yourself and to potential investors, makes perfect sense. But it’s not the whole story. Prototyping can be a costly business, and as a start-up, you will want to keep those costs as low as possible. Look for where you can make savings, do as much of the work as you can yourself and try not to get sucked into costly iterations, call in favours, and ask for new ones. Use a virtual CTO or a tech partner who is willing to share the risk and the rewards. Using your own capital, or that of friends and family, as much as possible, will mean you can make your own decisions, and with friendly investors who are going to be wholly supportive of your plans, you won’t have to give away precious equity in your business.
When I co-founded Kraydel in Northern Ireland, we used industry standard, cost-effective technology to build our prototype. I had long wanted to use tech to help the elderly stay safe in their own homes and using a Raspberry PI (at the time around £22) and a Bluetooth chest band commonly used in gyms, I built a rudimentary home monitoring device that would record heart rate patterns and provide analytics. I was introduced to Paul Moorhead, an ex Intel CTO, by old cycling buddies and discovered he had built a similar device for his elderly mother. Together we developed a blueprint for what would become Kraydel. With a grant from the Belfast Government, we hired a Mitra software engineer to build the MVP. We trialled the MVP with friends and family to prove the concept and gain customer validation. As Paul says, “You’re not going to get everything right, and it’s unlikely that the thing you want to build will turn out to be the thing that you need to build – so spend as little time and money as possible in exploring this.”
Timing is crucial, take your prototype to investors too early and you will find yourself giving away too much equity to secure funding. If you can wait until after you have an MVP and the all-important customer validation, you are in a far stronger negotiating position. Equity should be regarded as gold dust and protected as much as possible in the early days of your business. Paul concurs “You may be thinking ahead of the market and assume that they’ll get there, or you may be wrong about what people are willing to buy – but you can only find out which it is by building something – and if you spend all your money to get there, you’ll end up having to give a lot of equity away to fund the development cycle needed to correct your position.”
In the case of Kraydel, we didn’t initially understand the huge value of adding easy-to-use video-conferencing to the product, and of course we hadn’t foreseen Covid-19 and the massive shift to telehealth which made paired medical devices e.g., Pulse-Oximeters, compelling. By working with Mitra’s cost-effective offshore teams in the early years and focusing on features over infrastructure, we educated ourselves quickly, were able to showcase the product at Health Care and Age Tech events and became highly visible – far more so than would be usual for an early-stage company.
Kraydel is thriving and has since raised multiple rounds of funding and evolved their products to include communications via smart TV and automatic alerts based on environmental factors. Their systems are used by NHS trusts and care homes, as well as individuals.
So, my advice is to innovate cost effectively, assume that you’ll be throwing away your first prototype, seek funding from friends and family and where possible apply for government grants. Focus on showcasing the capabilities of the system and minimise the finer points, but remember your prototype is just that, and you will need time and funding to build your actual product. Work at gaining customer validation by testing your prototype with as many friendly adopters as possible and last, but most importantly, guard your equity jealously.
Dr Ashok Suppiah
Founder & CEO Mitra Group