When you are considering an idea for your future enterprise, you need to focus on the ability to secure investment and other funding alongside the need for consumer demand and operational sense. Without funding, even the most excellent idea will struggle to get started.
In the bid to obtain investment, there are many tools businesses can use to enhance their desirability. These include a strong proposition, data-backed claims and carefully crafted documentation that proves the worth of your venture. However, another tool that many businesses may not consider is scarcity.
By embracing scarcity, you can identify gaps in the market and attract investors with exciting, new ideas. This will help you to generate demand and revenue as well as serve your financial objectives.
In our guide, we explain what scarcity is and how it can prove helpful to businesses wishing to win investment and succeed long-term.
- What is scarcity?
- Why is scarcity attractive for investment?
- How do I showcase the value of my idea to investors?
What is scarcity?
By its definition, scarcity relates to things that are short in supply. A business that embraces scarcity is therefore one that pursues ideas that have not been done before and aren’t available elsewhere.
There are many ways to incorporate scarce ideas. It could include creating a proposition that serves niche audiences who have been ignored elsewhere in the market, offering a new product or service that people didn’t even know they needed or using strategies that differentiate you from your competitor. It doesn’t even need to be something entirely new: it could just be a twist on an existing idea that builds upon current offerings.
Regardless of what idea you follow, the underlying theme is using innovation and creativity to unlock value. Your focus should be on diversifying yourself from the market with an emphasis on helping consumers. This means considering the various pain points audiences may have in their daily lives and asking what needs aren’t being met or how they can be met better.
It’s also worth noting that utilising scarcity doesn’t necessarily mean revolutionising business. You will likely use traditional commercial strategies and operating models to enable you to provide for your customers. So, it’s still possible to embrace innovation and creativity to fill market gaps without having to reinvent the wheel.
Why is scarcity attractive for investment?
There are many benefits for businesses that identify scarce ideas, but one of the most significant is the investment potential.
Most investors will view countless pitches from businesses, many of which will have similar value propositions and models. By breaking the mould, you will ensure your venture stands out among the crowd, helping you capture an investor’s interest. It will also prove particularly attractive for investors who want a challenge or to diversify their portfolio, especially if you can verify the worth of your idea. This includes the likes of venture capital investors, who tend to gravitate towards high-risk, high-reward companies.
Another reason that scarcity can lead to investment is that it usually indicates increased demand. Ideas that identify and address gaps in the market often draw consumers who have had their requirements unserved elsewhere, so you instantly have a customer base to target. There is also much less likely to be any competitors pushing the same offering, meaning you will have a monopoly in that area without anyone to detract from your market share.
A particularly innovative or creative idea will also garner attention, such as gaining press coverage or being shared publicly. This again can increase the level of demand experienced, leading to sales, revenue and profit.
On top of this, a business that is open to new concepts at its core is also more likely to embrace innovation in its strategies and tactics. Depending on the method used, this can increase costs, enhance productivity and improve cost-efficiency.
The combined impact of this and the capacity to generate demand spells a better chance of success for these companies and an increased likelihood for profit. As the aim for most investors will be to obtain a healthy return on investment, this will compel them to offer you their money.
How do I showcase the value of my idea to investors?
Every business choosing the route of investment to fund their operations will need to showcase the worth of their idea effectively. By embracing scarcity, you may have a head start by proving you can bring something new to your industry and target customers. However, there may still be barriers to overcome.
If your idea is particularly scarce, you will likely find little market data to back your chances of success. In these instances, it’s essential to emphasise what makes you different and use it as a strength. Focus on how your creativity will help customers and any financial potential that lies in filling market voids. If possible, try to find success stories that are relevant, even if the idea doesn’t directly map onto yours, as an example of what can be achieved. You might also use consumer research to measure the public demand for your offering once it launches.
You should also ensure you have a sound business plan that shows the method behind your idea. Even if you are pursuing a revolutionary idea, it will still need to be underpinned by tried-and-tested operational strategies to ensure your ability to meet demand and manage expenses. So, be sure to detail how you will make your idea a reality and what the day-to-day running might look like.
On top of this, you’ll want to give a sense of the long-term goals of your business. This means having set contingency plans for when the market context changes. This is particularly important as, even if your idea is new now, copycats may emerge once you start to succeed. So, you need to have plans in place to counteract this threat and keep yourself competitive.
You should also focus on who you will be targeting, especially if you address a niche audience. This will help investors see the potential customers that exist for your business and establish just how large the market is. Ensure you have aligned your strategies to your target audience to show how you will effectively approach them and convert them into customers.
Finally, remember to have confidence in your idea. Know the value you are offering better than anyone else, using data to back yourself, and be passionate about it. This will help you shine the best light on your idea and communicate its worth to investors, persuading them to support you.
Conclusion
The concept of scarcity is essential in business to ensure new ideas and ways of doing things continue to emerge. As a result, consumers benefit from having their needs and wants served, and innovation is embraced across industries.
For the businesses themselves, it can be a helpful tool when seeking funding. By having an idea that is both scarce and valuable, they increase the chances of attracting investors and raising substantial capital to launch. When funding is often the first hurdle that entrepreneurs have to cross, this is a promising prospect.
If you are seeking investment for your start-up, utilising support is essential. At Pegasus Funding, we can help to identify the right opportunities for you, depending on your unique ambitions, and put you in touch with relevant contacts.
We can also help you develop your business plan and pitches to successfully portray the value of your venture to investors.