258 The Bell-Mason Diagnostic
The players remain in the concept stage for a few days to as long as a year. They are self-funded" until they develop a skeletal plan and secure the funding to move either to stage II (seed) or directly to stage III (product development) and begin staffing the organization.
STAGE II: SEED (PLANNING THE COMPANY) (3--12 MONTHS)
The purpose of the seed stage is threefold:
The seed stage lasts six months on the average. It can take over a year, however, to prove technology/product efficacy if the proposed company utilizes a particularly difficult technology.
Although not all high-tech ventures go through a seed stage, it is strongly recommended1 that they do so in order to allow for the formation of a first-rate team and the development of a detailed, high-quality plan for the company (as described in Chapter 3). If the founders receive a large infusion of cash with which to start the firm more rapidly, they tend to skip the rigors of this critical planning and technology-solidifying stage and instead redirect their attention to hiring people. Although the seed stage is vital, it is also a difficult stage because potential employees want to know that an organization is properly funded before they agree to join and because an extra round of financing means a further dilution of the founders' stake in the enterprise.
The technology and product feasibility are validated during the seed stage by creating a breadboard of the product or a critical part of the product, together with a product specification and a model of the corresponding target market(s). A formal business plan is prepared, as is a plan for stage III (product development), with the latter plan detailing resources, specifications, and product development schedules. Funding is secured for the entire product development stage, in accordance with the advice given in Chapter 4 and the answers to the key questions about financeability presented there.
1. January 5, 1990, I examined a well-written plan for $5 million that would have taken the proposed company from stage I (concept) directly to stage III (product development). I urged against it. The next day, I found a critical technological breakthrough on which the entire product was predicated. Although the necessary technological issues could have been examined by one or two people during a three-month seed stage, attempting to assess those same issues with a large staff at the product development stage would have been hopeless and would have led to compromising the product.