In a prior blog, we discussed the difference between PoPs (Points of Parity) and PoDs (Points of Differentiation). Now it is time to talk about PoC—Proof of Concept. While this seems relatively straight forward, there are actually many nuances to and perspectives on what constitutes “Proof of Concept.” Understanding how to frame and set expectations about PoC is an important discussion for the budding startup.
The difference in perspective became apparent at a @SoPEIN event (Society of Physician Entrepreneurs, Indiana Chapter) held at Regenstrief Institute earlier this year. The event included entrepreneurs and researchers in health IT, physicians and health system representatives, investors, and life science health ecosystem supporters. Attendees at various times expressed their desire to achieve or see Proof of Concept, and some founders proudly referenced that they had achieved this milestone. The discussion revealed the following differences as to how different groups interpret Proof of Concept.
The entrepreneur means “I got my app in the hands of a doc on her smartphone, and she was able to figure out how to use it and even communicate with a (pretend) patient!”
The researcher hears “They have proof that their app helps achieve measurable outcomes that I can get grants and publish a paper on.”
The health systems person wants to hear “They have an app that not only achieves better outcomes—they also can show that healthcare providers and patients consistently use it to save our system money AND improve quality of or access to care.”
And investors expect “They have an app that they can sell to multiple health systems, affect outcomes and get renewals, and can scale profitably if we invest in sales and marketing.”
Obviously, these are all very different levels of experiences and expectations. So how should a startup think about PoC?
It starts by understanding what stage you are in. If you are pre-revenue, you also have not established PoC in terms of having a paying customer. But you should be working towards product/market fit—developing an understanding of what specific functionality and benefits you are delivering, and to what specific market segment. When a customer gets an MVP (minimally viable product) in their hands and is willing to pay for it, or at least is willing to sign a Letter of Intent (LOI) committing to purchase, you are moving towards PoC at the product level.
Once you have a paying customer(s), you want to be sure that your value proposition is confirmed through customer experience. This confirmation requires setting up metrics in advance to systematically show the value you’ve created. Repeat purchase is a good sign that you have PoC of product/market fit. But you still need to demonstrate that you can get traction and scale beyond your initial customers to get the interest of angel investors and other supporters.
As you begin to get traction, PoC transitions from showing that you have a product to showing that you have product/market fit and finally to showing that the venture can grow. This might include getting new customers, as well as driving increased use within existing customers (more users and more engagement). This is often referred to as Land (new) and Expand (growth within) strategy. When you can show significant and consistent growth from some combination of new and existing customers, you have PoC that the venture is fundable and scalable.
So when it comes to discussing PoC, know your audience. If you are talking to a possible customer, understand what proof of concept means to them and talk about functionality and benefits. Show them you have a plan to measure outcomes. If you are getting ready to raise funds, understand that a different level of Proof of Concept will be required and talk about how you can scale.
Thanks to all who helped us find our own PoC with the book ideas…the product is complete, and it fits at least some members of our target audience. Soon it will be available in paperback. Then, we will find out if sales will scale. Join us at the book launch on June 12 to celebrate its release! Register here