Convertible Notes and Startup Funding
February 12, 2025
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In the previous articles, we have already read about why entrepreneurs require seed funding and how they obtain this seed funding. In most cases, the end result of seed funding is to implement a theoretical product idea on a smaller scale in the real world. There are product management techniques in place which have been created in order to achieve this purpose. Proof of concept, prototyping, and a minimum viable product is three such techniques that are commonly used. In this article, we will have a closer look at the meaning of proof of concept.
The main purpose of a proof of concept is to verify whether or not a theoretical idea is ready for real-world applications. A proof of concept is done by creating a working prototype of a product. This product is then provided to a small segment of customers in a controlled environment. Their usage of the product is monitored in order to determine its utility.
The purpose of a proof of concept is to confirm two things:
By building a stripped-down version of the product, entrepreneurs create “proof” that the implementation can be done on a larger scale if they have the resources to do so.
Earlier, the idea of proof of concept was widely used only in the information technology business. However, now since a lot of businesses have started adopting more advanced technologies, proof of concept has become more relevant to a larger target market.
There are different types of proof-of-concept projects which are commonly undertaken by startup firms. The different types have been mentioned below:
It is important to note that proof of concept may only be required for the new feature, design, or technology. Creation of the entire product may not be required in order to declare the proof of concept to be a success.
Proof of concept often requires dedicated time and resources to be spent. This can be a daunting task for startups where both times, as well as resources, are scarce. Hence, in order for entrepreneurs to spend time and money on this exercise, there must be some tangible benefits. The details of these benefits have been listed below:
From the above description, it is quite clear that a proof of concept is more focused on execution. It assumes that the features of the product are already known and only tries to execute the plan in a simulated environment. The results are then carefully monitored and inferences are drawn as to whether the technology or design must be implemented on a larger scale.
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