Pre-Startup Marketing and Financial Approach
Great, so, this is my first post on this forum, so I'd like to start off with a Hello to all of you on the forum.
So basically, I've been on the road to having a company for application efficiency and online hosting. It has it's own unique selling points, which I'm not really going to go too deep into. I do have some Investors on the road for the Seed round of funding.
Now the problem is, I don't really have a nice broad view of my marketing and financial approach. Since we are an application hosting provider, the first and most important thing we need are servers.
We are a little unique, and promote high availability, hence, if we want to start off with the least, we need to aim for atleast 1 cluster, to be speaking in technical terms, which will consist of two servers and two load balancers (not including the networking equipment, which costs a little over $600,000 in itself).
We plan on selling our products in terms of units. One 'cluster' mentioned above can sell 32 units. The first thing I need help with is setting the pricing of the units to meet up with the expected financials. Yes, I know that I should be researching on this, which I have and I did reach a pretty good pricing, which is not too high nor too low, creating the perfect balance between quality and has the potential to attract customers due to being cost-effective. Though, I really am not sure if I should raise it.
That's for the pricing. Now, we plan on starting out with exactly 50 clusters. Having 50 clusters gives us a potential to be having profits worth $1M per month, which is of course $12M every 12 months. This was our standard to start out with, but it makes our Series A funding go over the top. The reason we expect two rounds of funding is to generate enough traction using the Seed funding to be actually able to receive such hefty amounts.
We could start off with a lower amount of clusters and use the profits to upgrade, but this makes it extremely hard to reach the expectations of the investors, that is, the 10x they want in 5 years.
Say I start off with 100 clusters, but would they sell? I haven't done the market research, and that's what I really need help for. I've researched the problem enough I can guarantee that it is a viable idea and businesses need it in this generation of internet, and yes it is a growing industry (the cloud). How can I go forth with the market research? How can I estimate the market size?
And the most important question I need to know is,
How many units can we sell every month? Is this going to be consistent enough to achieve a sale of approximately 2,500 units in one year?
We have an advertising budget of $1M from the Series A funding.
The money isn't really enough, it's how the idea works and whether people need it is what matters.
Nevermind, moving on, all I wanted to know was what would the right approach and the right 'assumptions'? And in the end I'd just like to say that if you took the pain to read it, I certainly appreciate it. I should actually try making my posts a little shorter and then expect more replies :)
Not to pee on your parade by any means, but you should definitely roll up your sleeves and do your own research on the market; you've done some, but I feel like its not enough, especially if your trying to get funding for a company with millions in projected profits.
The market is where you thrive or die, so going into this blindly is dumb. Hire a research consultant or at the very least, find the most similar competition to you, see what they offer in terms of units/pricing. If your prices per unit(s) do not match up to what they offer, your either doing really well or you need to recalculate. Generally, you should roughly be around the same pricing per unit(s) that they offer, just going by basic microeconomics principles.
Marketing can definitely take a huge gain just by knowing the competition. Doing so tells you who the core audience is, what they do or don't react to, etc.
Research research research good luck!
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Carter is right; research is essential to get yourself a hang of the market. If you're not very keen to these kinda things, better consult a brand consulting agency, or attend workshops and seminars. However, being involved in the whole campaign is a lot worth it rather than letting the others do all the work.
Originally Posted by CarterJarrett