Member Insights

The Challenge:

The case at hand was brought to a recent Alliance meeting by an Alliance CEO whose investor-backed firm was considering whether to gamble big by going after a difficult segment of the market, which would take major investment and take years but could yield big results. The company's other option was to shoot for a different market segment that would be less profitable, but would also generate revenue more quickly with less investment. Meanwhile, the CEO's board was divided, with a major strategic investor pulling for the "big gamble."

If you were in this situation, what would you do?

Learn about the marketplace and gain financial independence first, then go after the big prize.

From what we've heard, it sounds like "the big gamble" is an incredible opportunity. I agree, your costs will give you pricing power in that particular market segment if you got to the right unit volume. However, corporate mega-firms, like the kind that has made a strategic investment in your company and is pushing for this big move, have a way of changing their minds frequently. I'm worried that until you break even on your cash flow, your company is very vulnerable.

If it were "my" company, I would start small (with your "minimum viable product"), learn about the marketplace and get some early revenue to gain some financial independence. For example, consider the case of Tesla Motors. The company started off simple, with one product, the Roadster, and learned a lot from it.  They planned to have it only as a small niche and then discontinue it. They have since developed their second model, stepped up production and scaled successfully. Then look at other electric car companies, like Fisker Karma or Philip Falcone's Coda Automotive, which "went big" and then went bust.

If I were in your shoes, I would lay out a strategic plan that shows how "my" company would go methodically at first, which would offer assurance that I would have the ability to take the big prize down the road. I would also make sure that if "my" mega-firm investor wanted "my" company to go for broke, they'll show their confidence by voting with their pocketbook.