How Do You Sell a Product You Can’t Name or Describe?

Neil Voorsanger





An old friend of my wife’s asked me to help her friend raise money for his biotech invention. I called the inventor and asked, what is the invention? He replied, “I’m sorry I can’t tell you because I haven’t patented it.” I asked what does it do? He said it speeds up biotech research. Has a prototype been tested? "No." How much do you want to raise? He said, “I must have $200,000.”

I became less gracious, “Are you out of your mind? How can I ask any investor to invest in something that he/she can’t see, understand, or know anything about?” I then told him forget it. He called our mutual old friend, who called my wife, who called me. I told him I was back on the case.

Well I know a lot about product research and anyone who can speed up research is a bloody genius. Here is why. Research is unforgiving and brutal. If I pay you as a researcher I expect you to invent something. Examples might be: (i) invent a molecule that improves gas efficiency by 50%; (ii) find a drug that eradicates cancer (that one has been ongoing for 50 years); or, (iii) predict human behavior (that one has been ongoing for 10,000 years and still no answers).

Here is why researchers get very little sleep. Imagine that you go to a beach in a foreign country and lose your car keys (I was stupid enough to do this). It is getting dark, the beach is empty for miles, the lifeguards have gone home hours ago, your loved one suspects you aren’t as smart as you always claimed, your children are out of control, the nearest pay phone is five miles away. Your loved one whispers supportive comments such as, “We are alone, we could be ravaged by roaming gangs, what are you doing to do!!”

You have a plan. You fantasize that your car keys will jump out of the sand, leap into your hand, and everyone can go home. Instead you stare at hundreds of square feet of sand, an endless sandbox hiding your car keys. You are too old to cry, too mature to scream. What do you do? Here is what you do, and here is what every researcher does.

Step 1: You state a research hypothesis: “As dumb as I am, I believe that my car keys are no more than 3 inches below the surface on this beach, i.e. I did not lose them in the parking area.”
Step 2: You then bound the universe of your research: I believe that the keys are somewhere in this ten square feet of beach (marked off by four rocks).
Step 3: Assure purity of the research (avoid contamination): You threaten your children that if they run across the 10-foot square area, thereby burying the lost keys even deeper, they will suffer horrifying consequences.
Step 4: Initiate experiment 1 of n: Using the most advanced research tool you can find (your child’s sand shovel), you start digging the first of 100 small search areas.
Step 5: Determine whether experimental outcome advances knowledge of the hypothesis: After six experiments, the first six areas of the beach don’t have the keys. Continue research.

14 experiments later, I found the keys. All experimental research follows the same procedure. You can see the challenge of real research is not the brilliance of the ideas but the millions of experiments it takes to find the one molecule that works. In other words, the researcher who can rule out the false trails the fastest usually wins, i.e. the fastest researcher usually wins. Thus, this inventor was promising an experimental procedure that would speed up this trial-and-error of thousands of experiments, by a factor of 3-10. Worth mountains of gold in the market but I couldn’t name it, prove or describe it.

Furthermore, I was blocked by the US Government (SEC) who would insist I go to jail if I promised investors untold riches, and even worse, promised these riches to investors who are not “sophisticated” and have not been apprised of all the investment risks. In the meantime, the inventor’s lawyers were terrified that as my greed set in I would make some unbounded claim and we would all go to jail.

You can always tell how upset you have made a lawyer by the magnitude of years he/she cites as an expert in the field, the greater the years, the greater the panic. My lawyers were citing hundreds of years of accumulated experience, so they were very upset.

I sat there in a funk knowing piles of gold were ours if I could just solve the problem. I calmed myself with deep breathing and restated the problem: How to get a group of investors to invest $200,000 in an invention that cannot be named or described but may increase the speed of biotech research by a factor of 3 to 10. I cocked my ear so I would hear suggestions from the universe, silence.

As often happens when panic has drained the last drop of hope (like a vampire), inspiration hits. Since I couldn’t name or describe the product couldn’t I create the same investment incentive by getting a highly respected biotech scientist from one of the pharmaceutical research labs (the target market) to review the product and assure me, yes, if it could be made, it would do what it promises to do, and yes, he/she would buy it?

Since most investment strategies involve Step 1, listen to my solution and Step 2, if you believe it, then future market promises are possible; I reversed the procedure: I said, since I can’t name or describe the solution, if I could get a potential buyer from the future market to assure a group of investors, yes, I have seen it, it works, and I would buy it, haven’t I done the same thing without violating the strictures of the SEC?

With the lawyers escorting me down every corridor, I did exactly that, got a leading research head from a Fortune 500 pharmaceutical company to review the invention, after many hours of discussion with his firm and their approval, he appeared in front of a group of our investors, and said, “Based on the biotech research our lab is conducting, I would buy this invention.” He received no incentives other than reimbursement of his travel expenses. We raised $187,000 in forty-five minutes.

If you feel this post can help a friend or scare a foe, please forward.

© 2007. Neil Voorsanger. All Rights Reserved.

Working Smarter – Getting the Deal

Neil Voorsanger


This week I got a distressed call from an old friend, a CEO of a startup seeking to raise millions from investors. He was having no luck. He sent me his business plan and PPT and after I reviewed it, I asked him, “I am curious. You were an outstanding hedge fund manager, yet in your business plan I cannot figure out how I, as the investor, win big?” He answered, “Isn’t it clear from my presentation?”

Herein lays the problem for him, for anyone trying to get a major commitment, and potentially for you: He succumbed to the major failing of proposals – if I can’t explain to myself how I win, I don’t commit.

Despite his best intentions, he made me, the potential investor define his value/the return to me. He brilliantly described his business, how it would work, how the product would work but never answered these questions:

1. Why this would be a great investment for me?
2. Why I should invest now rather than later?
3. Why I should invest more rather than less?
4. The possible risks and how these would be avoided/minimized?

Instead my friend devoted 42 PPT slides to an exhausting explanation of his product/service, gave me financials that only went up (from left to right) and when I was finished I still couldn’t answer these basic questions:

5. What is his market?
6. What is his business?
7. What is the product?
8. Why is there a proven need for this product over the available products?
9. How does he make money (i.e. what is the revenue engine)?
10. Why will he be superior to his competitors?
11. Why does he need my money?

If I am the investor and I can’t put into my own words the answers to these simple questions, then I do not have the logical framework for making an intelligent investor decision. As a potential investor I like the entrepeneur but I have to sell his deal to my investors and I can't explain it. So what do I do? I say, “There is great potential for you and I suspect you will be very, very successful. Let me get back to you in about a month.”

My purpose is not to beat-up on a hard working entrepreneur but to suggest that you can craft a wonderful presentation if you:

1. Pretend you are the audience; that is, frame questions you would insist on having answered, and see if your presentation answers them.
2. Present your entire presentation in not more than 15 PPT slides (I held workshops for hundreds of entrepreneurs on how to raise money from VCs and the VCs told me over and over, keep it to 15).
3. Rehearse your presentation aloud in front of a mirror at least 20 times.

How well could I have done? To give you some confidence in my suggestions, next week I will explain how I raised $190,000 in forty-five minutes from Angel investors for a biotech invention that I was not allowed to name or describe (the inventor had not yet patented it).

If you are interested, check in next week.

Should you feel these tips will help a friend or scare a foe, please pass on.

© 2007. Neil Voorsanger. All Rights Reserved.