Yesterday, I wrote about how innovation is the fourth arena of excellence.  The importance to investors is that a highly innovative company is one of the best ways to insure their investment against the changing needs of the marketplace.

For example, examine a company that has a very popular product.  An investor puts their money into the company hoping that the company grows over five years and then is purchased for a much higher value.  That purchase could be by the public in an IPO or by another company, but that purchase provides the investor with their exit plan.

The company value increases as the company increases its sales and likelihood of future sales. This in turn only happens if the product (and products) continues to sell.  If something happens in the marketplace that makes the product unpopular (another product from a competitor) then the company needs to be innovative again and come up with an improved offering (or another offering) that insures the investor will get their money.

One of the barriers to getting that investment is that companies often do not show signs of future innovation but rather an inability to identify growth points.  Without these insurances against marketplace changes, the investors are not likely to provide their money.

Just as likely investors will not provide their money, customers will not buy products from young companies because they are unsure of the lasting power.  If they know that the company will continue to innovate and provide their customers with future advantages, the potential buyer will more likely take a chance and buy.

Innovation in what gets a startup company created. Too many startups stop at that innovative step…by examining how they innovate and can continue to innovate, startup companies can be more attractive to both potential customers and investors.