and are able to identify such customer needs that are unfilled or poorly met. At earlier times, Microsoft did this with PC programming languages, Netscape with a mass-market browser, and Apple with the Macintosh, iPod, and iPhone. Some entrepreneurs create companies around a product or service they themselves desperately want, as Steve Wozniak did with the first Apple computer and Steve Jobs did with the iPad. But attracting funding from professional investors usually requires more than emotion: They want quantitative and qualitative data demonstrating the superior benefits of the new product or service as well as what potential users are willing to pay to get it. This value to customers ultimately depends on what competing or substitute products and services are available and at what price.

Some startups enter a market with a product or service that is cheaper but less functional than what large, established firms offer. The new offering may seem to offer little value and the venture little potential, but this evaluation may be misleading. Clayton Christensen’s 1998 book, The Innovator’s Dilemma, discusses this specific type of opportunity and threat—when large firms focus too much on existing customers and fail to recognize the threat of new technologies, services, or business models that are initially inferior but improving quickly. 1 Such examples have occurred with small disk drives, personal computers, digital photography, and Internet-based or SaaS applications versus traditional packaged software.

4. strong evidence of
Customer interest

Startups need to convince investors that actual customers are willing to buy the new product or service. Most entrepreneurs underestimate how difficult it will be to sell beyond “friends and family.” Some new companies boast they have lined up many beta users and marketing partners, but these are not as convincing as actual letters of intent to purchase.

A prototype or early product version
helps land new customers by allowing
them to visualize how the product will
work. Product firms that try to get cus-
tomers or funding without a prototype
generally have trouble. 5, 6 Service start-
ups do not have physical prototypes,
but they can try to convince customers
to begin with a limited engagement
and then use a small success to indi-
cate they can handle a bigger project.

5. overcoming the “Credibility Gap” The “credibility gap” is the fear among customers that the venture will fail, leaving the buyer without technical support or a future stream of product upgrades. Since more than 90% of ventures do fail, this fear is real. It is easy for customers to go with an established vendor, even with an inferior or more expensive product. This situation leads to a “Catch- 22”: a startup must line up paying customers to serve as references for new customers, but new customers will usually not sign on unless the startup has sufficient money to last a significant time period. The credibility gap may be the most common cause of failure for startups. To tackle this dilemma, startups can do several things. They can offer large discounts to get those first reference customers, or partner with established firms for long-term support. They can line up investors, advisors, and board members to show the startup is a viable enterprise. Or the startup can package its product or deliver the service in such a way that the customer experiences immediate benefits and does not have to worry about the venture’s longevity.

6. Demonstrating early
Growth and Profit Potential

Many investors want to know how the startup will grow the business and generate enough cash to reach breakeven and maybe even profitability. These

size alone
does not make
a market attractive.
structural factors
are more important.

Call for Nominations for ACM General Election

The ACM nominating Committee is preparing to nominate candidates for the officers of ACM:

President,

Vice-President, secretary/treasurer; and two members at Large.

Suggestions for candidates are solicited. names should be sent by november 5, 2013 to the nominating Committee Chair, c/o Pat Ryan, Chief Operating Officer, ACM, 2 Penn Plaza, Suite 701, new York, n Y 10121-0701, uSA.

With each recommendation, please include background information and names of individuals the nominating Committee can contact for additional information if necessary.

Alain Chesnais is the Chair of the nominating Committee, and the members of the committee are Sheila Anand, Susan Dumais, ben Fried, and Fabrizio Gagliardi.