Should you build a product based VR business?
Hello, friend, and welcome back to Episode 12 of my 31 Day Challenge, where I'm answering your questions about creating a career or business that you love. In today's episode, I'm going to be deep diving into a very, very specific question that someone has sent. This is a longer question which I absolutely love, because it's great to have loads more context and get a real understanding of where someone's coming from with that question. But essentially, this question boils down to, should we build a bespoke software that we can then sell to clients in an industry? Or should we offer a more tried and trusted, already existing kind of service to clients? So I'll be diving into that In this episode.
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So okay, let me read you a little bit of this email butt I'm not going to go into too much detail and I might miss out on a couple of things because I want to be able to keep this person anonymous. But essentially, they're saying that they work in a small startup that has a really big problem with selling their VR product. They offer custom VR walkthroughs for home builders, so Home Builders that are building new houses, so they’re basically building a software that offers these walkthroughs of houses that don't exist yet and what they're saying is, they’ve k really concerned because it doesn't seem like it's very scalable or profitable to be building this because essentially, you'd have to build a new walkthrough for every single new house and they're also saying that there's no proof that clients even want this because they've not secured any deals, they've not received any money, and they've also got no investors, they're just bootstrapping like classic startup style, but that is putting a massive strain on the team and so they are asking in this email, whether it would be smarter to switch to a more kind of tried and true service, like Matterport, or something where it’s a traditional virtual tour for existing properties. So that is the crux of the email. They also go on to ask - is it a good idea for a small startup to be pitching expensive custom services to non tech industries? Or would it be smarter to target businesses that are already involved in VR?
Okay, there's a lot that goes into this and what this boils down to is, it doesn't sound like there's a very good product market fit, which if you're not aware of what that term means, generally, the first thing that you need to do when you start business is, you need to make sure especially if it's a product based business, you need to make sure that there is a need for that product, you need to check the market, you need to check that your product fits in the market, hence, product market fit. What that means is, you need to check that your product is solving an actual problem and the way that you check if it is solving a problem is talking to the customers that essentially you're building that product for. Not only do you need to check whether your product is solving their problem, but it's solving their problem in such a new and innovative way that they are willing to pay more or pay extra or pay full stop. To solve that problem, It needs to be that much of a problem. So the key thing that I'm hearing here is that it doesn't sound to me, like there's been enough research and there's been enough conversations with these custom home builders to actually ascertain whether or not they even want a product like this. And I'm sure that from kind of what I know, which is not a lot about that that kind of industry but from what I know is, that for people that buy houses, without you know, kind of seeing them, if you kind of buy a home based on just like a plot of land that will eventually become a house, if you're buying it before it's built, generally speaking, you will either go to like a show house, or like a marketing suite, which is basically showing you what the house will look like when it's built? Or if you're even earlier than that, then you will buy based on concept art and floor plans, and that kind of thing, and maybe a 3D rendering. So I understand, logically why the CEO of this company might think that it's a good idea to build these kind of immersive walkthroughs, because that would that to me sounds like yeah, I mean, that would be really great. If you didn't have the marketing suite already, to be able to get someone to put a headset on and actually feel like they're in the house and get a sense of the space and the you know, the kind of feel for that house before it even exists, that sounds like it should be a good idea. But it doesn't sound like the company has tested the theory that this is actually something that they want, and not only do they need to test whether or not the industry wants that, but they also need to check whether they'd be willing to part with their money and so a brilliant bug, that is one of my favourite business books ever, is called ‘Will It Fly?’ and it's by a brilliant entrepreneur called Pat Flynn, who I mean, he's just brilliant and if you don't know him, I would highly recommend that you follow him and he's got a brilliant business podcast called the Smart Passive Income, which, you know, deep dives into every possible facet of business, but a really inspiring guy. The book ‘Will It Fly?’ is all about testing the theory that your product will sell before you actually build it. So this is, especially for a startup, this is so important, so many people build something because they go - oh, yeah, this is a good idea, they build it and then they're like - Huh, why is no-one buying my thing? Like, who isn't buying my product? And it's because they didn't check with their potential audience first that it was actually a good idea and to answer the question of, should this company be repositioning and doing tried and true kind of virtual tours instead? I would say depends on the aspirations of the company, because it sounds very much to me, this startup is trying to be a product company, but it's actually a service based company, in which case, yes, 100%, you should be actually targeting just real estate agents and the industry where houses already exist, and go down the virtual tour route. Because 100% that is tried and tested, there is a need for it. The market is already educated about not only the benefits of virtual tours, but they also understand how to distribute that properly, and how to embed that within their marketing and sales themselves and don't need hand holding. So that's 100%. But if the company's aspirations is to be scalable, and be a product based business, I think you need to think about well, first thing is have conversations with that industry, if you're really set on going after that particular kind of client, you need to have a sit down and understand, it comes back to like, so many of the previous episodes I've talked about, you have to listen to your customer, you have to listen to what they're after, what are their pain points? What are their problems? You know, do that because, to me, this sounds like you're assuming that they have a problem selling these houses. And I mean, I don't know much about that world, but I don't know whether that's the case and maybe it will look different in COVID times but it doesn't strike me as being particularly…I don't think a virtual walkthrough of a house that has not been built adds any more value than being able to visit the marketing suite? The only value adds is, that you could do it completely remotely and it is more scalable. But in order for that to be the case, they would have to invest in the infrastructure to be able to send out headsets to every potential customer of theirs. So it's kind of a bit of a chain, a chain event, if you will. So not only will they have to invest in the this custom product, which will, unless you can make it, I mean, that in itself is not scalable, because it's custom, right? It's custom built every time. So that services, so you might as well if you're going to do service, you might as well do service for an industry that already has proven that it wants it and that it will pay for it. If you want to go down the product route, you need to be a bit more clever with looking at how you make that product and that software scalable. So, for example, and Matterport kind of does exactly that, for an industry that obviously is slightly different industry, but that's kind of what they did for the virtual tour industry. Matterport is a scalable software that allows other people to build on top of it, so instead of going direct to the customer, maybe your customers for this product is not the customer, is not the home builder, the customer is the VR developer or the 3D artists that would build on top of it and use it maybe. Maybe it's like a product where, it’s a really simple way of creating 3D visualisations for houses or any kind of building and maybe it’s about something more along the lines of widening the kind of audience, is more about taking a blueprint and turning it into a 3D visualisation. So maybe there's a way that the software automatically interprets a blueprint, and creates a VR, 3D kind of environment from the blueprint that becomes scalable. Again, you'd have to double check that, that was interesting to the client, and that they'd be willing to pay for that or you go directly to, you know, either kind of people that already work directly with that industry. So maybe your client isn't the home builder, maybe your client is the architect. Okay, so like maybe that's a way to go because that potentially could be interesting if an architect is trying to win business with a home builder and they're kind of pitching their vision for what these houses would look like, maybe they want a software that interprets their blueprints into 3D visualisations. But again, you’ve got to be careful, because as soon as you start doing custom stuff that is not scalable, you need to decide or your CEO needs to decide what is the goal of the company? It doesn't sound like there is, it sounds a bit kind of classic startup of just kind of hustle and grind and, you know, pulling something together without really thinking it through. So I think those are a few things that I would kind of highlight as being things you need to think about.
So to kind of try and recap to put that into a nice little sign off with a bow I guess. Number one, will it fly the idea of actually going to your end customer and testing whether or not they want your product?
A personal example would be that it was never my intention to sell my VR piece but when I was creating Keyed Alike, which was a VR drama, I did that in a bubble without ever checking what the landscape looked like for VR dramas. I did it without checking whether audiences actually wanted VR drama. I did it without checking whether VR arcades or VR cinemas or film festivals were interested in VR dramas. So it would be really stupid of me to have built Keyed Alike and then gone on to be really pissed off and annoyed when people didn't want to pay attention, or people didn't want to buy it for their VR arcade or people. It wasn't the kind of content that someone wanted to licence for telecom company, like would have been really stupid of me if I had thought that I mean, I didn't because that was never the intention with it but do you know what I mean? Like if I for example, if I wanted to create a piece now that I could licence worldwide, I would do my research first, I would reach out to all of the VR arcades that are active I mean, right now obviously that's not many but you know, when they start opening up again, I would go to all those VR arcades and I would say tell me what are the best selling, what are the kind of like you know the best titles that your arcade? What are the things that get played or experienced over and over again? Chances are that they will come down to either horror films if it's in the VR cinema or in the content realm, like horror or travel related content, or something kind of game related, like Beat Sabre, which is all to do with gami-fied rhythm. Those are most likely, the kind of highest profile and genres, right? So if I wanted to make money and make something that was scalable, and that I could licence, I would get that information first. And now I'm going to reverse engineer my product, so now, if I wanted to do that, I'm now going to go and make a VR horror because I know, I've already tested, I already know that the audience is there, I already know that's what people are going to want. I already know that, you know, if VR horror is one of the number one genres on Steam, if I created that, I could probably make money selling on the store. So it's all about understanding your audience and it's all about obviously, in that example, that's if I wanted to create something for the sake of a either getting loads of eyeballs on it, or be, you know, wanted to make money from it, which is exactly what you're doing. Because that's what a startup is. That's what a business is, you can't as much as it is kind of romanticise this idea of like…you know, starving artists like Silicon Valley style startup where you're just hustling, and everyone's grubby, doesn't sleep because they just hustle so hard… that's so romanticised and it's so boring, is such a stupid narrative to follow. Like, it's not glamorous, living on someone's sofa whilst you hustle away an idea that’s not deeply understood. It’s that you didn't take the time to go and ask the person that you're trying to sell it to, if they actually wanted it, you know? So, okay, I'm getting off my high horse now.
Those were the things I would think about, if you are going to be a service based company, so deciding whether you want to be product or service based, and then if you want to be service based, that's fine, but yeah, go into a market that actually wants your services. So definitely, if you're looking at the kind of the real estate industry, they already know that they want virtual tours, there's proven distribution methods, so choose that?
Also, you should be redefining who your target audience is. So if you're really set on this idea that you've got, and I do think that this startup needs to really reconsider what the product actually is in the first place and what problem it's solving, but once you've done that, maybe it's about going - okay, well… if home builders aren't buying this product, then it probably means that they're not your actual customer. The the customer might be an architect, or it might be another VR developer, or you could be going after people that already offer virtual tours but maybe they want to be extra innovative, they want this extra service that you can offer. So go to people in the industry that you're targeting, if that makes sense.
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