To get money from an Angel investor or from a banker will often require entrepreneurs to demonstrate a proof of concept. This begs the question, “what exactly is a proof of concept?”
While the term is kind of fuzzy, a proof concept is evidence that the company, product, or service is financially viable—the business model works. Normally, a proof of concept includes research or testing or testimonial.
A simple proof of concept might include the use of qualitative research methods such as focus groups or interviews with prospective customers. A more definitive proof of concept could include orders for a new product or letters of intent from customers. Alternatively, a manufacturer might develop a working prototype of a new product for demonstration purposes.
Essentially, the business or revenue model is justified by a proof of concept. Ultimately, this reduces the amount of uncertainty involved with a new product or service and this evidence gives the financier comfort that the money is well spent.
John Bradley Jackson
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