My business development process begins with identifying a problem or need you can address in a market. You can go through a thoughtful ideation to find a problem within an industry that is well suited to your technology concept/implementation, personal strengths, or passion. Before we dig into that it is helpful to understand how big an opportunity needs to be and what that looks like from a sale price and volume standpoint. Remember that this is business and the goal is making sales and making money. It isn’t about what cool technology you can build, how many patents you can file, or how much R&D/investment money you can secure.

Before developing a business opportunity it’s helpful to get your head around the scale of opportunity you need to try to address

An entrepreneur and a few friends can put together a pretty good business that makes a few million dollars each year. They would all do very well for themselves. The catch is, they better boot-strap that business as it is not going to interest an investor. If you are going to need money to get your product out there, then you need a market that is large enough that an investor has a reasonable expectation of getting a 5x-20x return on their investment. That means you need a market where you can make a lot of revenue. Perhaps $100MM/yr a few years down the road. To get that appreciable quantity of sales revenue you are going to need a market that is very large. I suggest nothing smaller than $1B+. That is a market large enough to produce $100MM in revenue if you stumble and only capture 10% of it.[1]

• $100MM market: too small -> 10% market penetration is only $10MM in revenue
• $1B market is interesting -> 10% is $100MM in revenue

One way to think about market size and pricing I like to call the cost of everything in the living room. The idea is that the cost of a couch should be about what the TV set costs, what the coffee table costs, and what the arm chairs cost. No one has a $1MM couch. No one sells a $50 couch. Your product is no different. A $1MM product makes sense for a $300MM Boeing 747 airplane. A $5,000 product makes sense for a private airplane owner who spends that much on fuel in a weekend. A $100 product makes sense for a car owner. When you look at the potential market and your goal to earn $100MM you can think of it like this:

• Sell 1M things for $100 -> 183M cars, 2.4M truck, 8M motorcycles in US
• Sell 20k things for $5,000 -> ~200k general aviation pilots, 200k private aircraft in US
• Sell 100 things for $1MM -> ~700 B747s in service, 7,400 commercial aircraft in the world

Now that we have a good sense for the scale of the problem we want to address and some tools to evaluate it’s size, it is time to dig into identifying a problem to solve.

[1] Given a base of customers, at any given time only a small fraction are ready, willing, and able to buy your product. Maybe some decide to wait until next year, some already spent their budget, others will go with competitors products that inevitably show up, and maybe others just missed your advertising. As a result it is hard to capture significant market share quickly. Many venture investors estimate a new venture will at best capture 10% of an opportunity.