We recently asked some of our leading VCs, investors and other people in the know to consider the following question:

How important is it to investors that the company can demonstrate good knowledge of its proposed markets, customers and competitors? Why?

This is what some of them had to say ...

Mike Hirshorn Partner Four Hats Capital

"In all my years in venture capital the least satisfactory part of the business plan has been the understanding of the market.

To be successful in business you need to understand the market. This does not mean the ultimate market size. It means the knowledge of who the initial customer is and what will influence him or her to buy your product. We are talking about who will buy your product at what price and how many. Ideally you will have met the customers face to face and received a down payment.

Many start up biotech businesses just focus on developing their science or product and assume the market will take care of itself. These companies usually just end up as a bottomless sink for money."

Graham Mitchell  Principal Foursight Group

"There are many factors that an investor takes into consideration within the broad categories of "technical feasibility" and "commercial attractiveness" and it is hard to imagine anything besides IP that is more important than time to,and accessibility of, a defined and well-understood market"

Carrie Hillyard Partner CM Capital

"If the team does not understand what its market is, who the customers are, what products the customers want and who else is competing for the same customers, the company is not ready for investment."

Rob Lizt Director La Jolla Cove Investors

"It's very important to an investor that the company knows its market, customers and competitors, because without this information, the company is without a game plan of where it proposes to go and how it's going to get there.  That is a recipe for disaster.  I see in too many presentations the huge defined market for the product, but no details on how the company will get a specific percentage of that."

 Dr Steve Goulay Partner GBS Venture Partners

"If a company cannot demonstrate good  knowledge of its proposed, accessible market segments, customers and relevant competitors it is unlikely to convince prospective investors to engage with it"

Hamish Hawthorn CEO ATP Innovations

"From my experience of working with over 80 companies here at ATP Innovations, having a deep and demonstrable knowledge of the market is, above all, the key indicator of success. Getting close to your customer from day one is absolutely essential - it provides direct and actionable feedback into the design process, it gives confidence to investors, and importantly it creates market traction well before you commit and allocate finite resources to the manufacturing process."

Dr Phil Kearney Licensing and External Research Merck

"It's essential as it informs not just the commercial opportunity but more importantly the strategy for filing. Thus early discussions with the agencies can be taken with a more concrete proposal"

Joe Baini Director eXecFactor

"Understanding and being able to demonstrate knowledge of its proposed markets must be core to all activities for a company.  Markets are never static and the best way for any organisation to compete strongly is to understand why customers buy in a particular way.  This provides confidence in predicting where that market is headed.  It has been proven many times over that truly understanding customers' thinking enables a company to create market driven strategies (not marketing driven), thus not only establishing a true demand, but build a strong enough selling proposition that ensures success.  Failure to do this ensures a failure in delivering that success."

Jim Landau TEC Chair

"Possibly the most important questions that need to be addressed in any opportunity assessment is the size of the market sales and numbers and the compelling reasons why the target markets will want to buy the product/service."

Dominic Marinelli Director Terrain Capital

"The answer is that it is very important.  To me if the company cant demonstrate this knowledge I walk away immediately.  I simply don't have the knowledge to know all markets, customers and competitors.  If the company does not know what others are doing and why how can it hope to be successful?  It's too easy to be blindsided."

Chris Boyer Executive Director Bio-Link Australia

"Investors want money.

Money comes from satisfied customers.

Without knowing who those customers are and what they want, a company is likely to have reduced chances of making the money change hands.

Therefore, an investor seeking to minimise risk, should logically invest in companies who, amongst all the other important factors, can demonstrate sound knowledge of the customer."

Sounds simple. I guess the question is why is this knowledge so often assumed, ignored, or undervalued?"