A POC is about testing the commercial feasibility of a concept, whether it is a tech innovation, a product or a service.
Proof of Concept or POC, as the name indicates, is a test that provides evidence that the hypothesis on that concept has been proven. In business context, especially startups, POC could be a - hypothesis around a technology innovation, service, value proposition, price-point, business model or anything that needs to be proven or demonstrated.
For example, if you are building a software or hardware product, a POC could be done to demonstrate that the product works and performs the tasks that it is intended to do. In addition, when doing a POC, you will also have to check on things like ease of use by the user, bottlenecks and things that need to be improved in the product.
However, testing a product is just one component of the POC process for startups because you have not started a venture to just create a product. Your venture is about monetising the product – either by selling to someone who will pay for it, or by building a community/user base so that others (e.g. advertisers) will pay for using the product/service, or any other model in which the product or service can be monetised.
Testing your business idea
I often see startups declare that they have had a successful POC because they have developed a product that works. But one has to go beyond that. You have to test whether the business aspects around the product work as well.
For example, are you able to produce the product or deliver the service at a cost that will make it financially viable to launch? Are your intended customers seeing the value of the product or service, and most importantly, are they willing to pay the price that you estimate they would pay?
In other words, a Proof of Concept is about testing the commercial feasibility of a concept – whether it is a technology innovation, a product or a service.
POC vs. Prototype
Often startups get confused between a prototype and a POC. A prototype is just one component of a POC. POC is a broader term in which a prototype is just one aspect to be tested.
A prototype, or a MVP, is a rough/early or a version of the product that is not mass-produced, but produced as a single unit or in very small quantity to check if the product works as intended.
Why is POC important?
POC is important because without establishing that there is a reasonable chance of building a profitable business around the innovation or idea, there is no point in starting the business.
An innovative idea enamors many entrepreneurs, and they rush to convert that idea into a venture. But a startup is about building a business. How well you plan different aspects about your business is going to be as critical as the innovation or product or service or idea. And POC helps you test the financial viability and other aspects of the business for that innovation.
The writer of this article is Vikram Upadhyaya. He is the Chief Mentor and Accelerator Evangelist at GHV Accelerator. He is also the Co-Founder of the Indian Angel Network Incubator and an advisor to projects being undertaken through the Telecom Centres of Excellence (TCOE).