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Building a Product Roadmap

Why you need a roadmap

Entrepreneurs often present investors with great technology ideas, but no roadmap describing how that technology will be brought to market. Building a product roadmap can substantially increase your chances of getting funded, because investors can see the potential applications, without losing sight of the immediate goals.

A great roadmap walks the fine line between being too narrow ("a one-trick pony") and too wide ("all over the map"). Investors will want to see that you have a focused idea of where you are going in the short term (and why), and that you have plenty of other market opportunities to explore in the longer term, both for increasing your market, and in case your initial markets donít mature.

How to build a roadmap

Start by brainstorming all possible applications of your technology. Try to think "outside the box" as much as possible. Write every idea down, no matter how crazy. Talk to colleagues and friends in related markets, and ask for their ideas. As the flow of ideas runs dry, begin organizing them into related markets. These relationships can be technology-based (e.g. different hardware bus technology) or market-based (e.g. enterprise software vs. consumer software).

For each market, define the product that you would build to target that market. Size the market conservatively, using analyst estimates and reasonable assumptions about your penetration. Estimate the cost to develop and sell the product, and calculate a rough ROI. Take into account your teamís experience, and the learning curve. Understand the competition, and what your technical edge is.

Look for areas where you can use the experience gained in one product to develop other products more quickly. For example, you may be able to reuse 80% of the development effort for one product to build another product more quickly. Often these reusability factors can be presented as competitive differentiators. Your roadmap should make clear how your product is different from your competitors.

Rank the markets on these factors, and decide on one or two products that you will initially develop. Also identify several other markets that make sense to pursue in the future, or if the first ones donít pan out. Your roadmap should show your company building a manageable number of products (like two or three) developed in a realistic timeframe (a year or two). Products that are further out do not need to be very specific, but should be characterized by one or two key differentiable features that enable entry into new markets.

How to present your roadmap

Demonstrate focus by building your plan and presentation to spend the most time on your initial products. Size the markets conservatively, and pick realistic penetration rates. Show potential and reduce risk by presenting secondary markets, and emphasize that they are follow-ons or backups to your initial pursuits.

Roadmaps are always subject to change. Venture capitalists usually have relationships with experienced industry veterans who will look at your plans. Be open to suggestions that you make major revisions, or re-prioritize your roadmap. Early stage investors expect that plans may change as more development and market research is performed.

A good product roadmap demonstrates to potential investors that you have carefully considered your product lines and target markets. It highlights your product focus, and reduces the likelihood that you will be distracted by related markets. Investors will be able to see related products that increase the total market size, and reduce the risk of having only one product. In the early stages of a company, a roadmap is a great way for an entrepreneur to communicate company direction, and ensure that he doesnít get lost.

An example company

One of our portfolio companies, HotRail, developed a chipset for high performance communication in multi-processor computers, and bootstrapped themselves to $1million in sales and near break-even. We discovered that their product was near the end of its lifecycle, so we worked with them to develop a product roadmap for the SMP space. The founder then worked to develop a next generation technology to address the needs of newer processors in SMP machines.

With a clear plan for future products in SMP, we led an initial round of funding and began to expand the company. As we began to discuss follow-on rounds, a potential investor suggested that this technology might apply to other sectors, particularly the communications space. We found an expert to help us build a new roadmap to encompass these other sectors. Here, we had a real breakthrough: analysis of these different sectors showed that the value of this technology in communications was much higher than in SMP computing. We decided to refocus the company on communications.

Once this switch was made, raising money became much easier, because the market was large and growing, and the product direction was clear. After three years and three rounds of venture financing, the company agreed to be acquired for $400 million by Conexant. This was a terrific outcome for the investors and the entrepreneurs. The process of creating a roadmap, broadening it to include a variety of sectors, and then focusing on the highest value application, directly contributed to this success.

Tom Shields, Woodside Fund

                                      
 

 

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