Module-4

Prototype development Stakeholder Engagement Strategies : Investors, Partners,

Customers, Advisors and Mentors

1) Investors

An investor is any person or other entity (such as a firm or mutual fund) who commits capital with
the expectation of receiving financial returns. Investors rely on different financial instruments to
earn a rate of return and accomplish important financial objectives like building retirement savings,
funding a college education, or merely accumulating additional wealth over time.

Investors typically generate returns by deploying capital as either equity or debt investments.
Equity investments entail ownership stakes in the form of company stock that may pay dividends
in addition to generating capital gains. Debt investments may be as loans extended to other
individuals or firms, or in the form of purchasing bonds issued by governments or corporations
which pay interest in the form of coupons.

● Investors use different financial instruments to earn a rate of return to accomplish financial
goals and objectives.
● Investments include stocks, bonds, mutual funds, derivatives, commodities, and real estate.
● Investors can be distinguished from traders in that investors take long-term strategic
positions in companies or projects.
● Investors build portfolios either with an active orientation that tries to beat the benchmark
index or a passive strategy that attempts to track an index.
● Investors may also be oriented toward either growth or value strategies.

Passive Investors vs. Active Investors

Passive investors tend to buy and hold the components of various market indexes and may optimize
their allocation weights to certain asset classes based on rules such as Modern Portfolio Theory's
(MPT) mean-variance optimization. Others may be stock pickers who invest based on fundamental
analysis of corporate financial statements and financial ratios—these are active investors.

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Types of Investors
1. Angel Investors
An angel investor is a high-net-worth private individual who provides financial capital to a startup
or entrepreneur. The capital is often provided in exchange for an equity stake in the company.
Angel investors can provide a financial injection either once or on an ongoing basis. An angel
investor typically provides capital in the early stages of a new business, when risk is high. They
often use excess cash on hand to allocate towards high-risk investments.

2. Venture Capitalists
Venture capitalists are private equity investors, usually in the form of a company, that seek to
invest in startups and other small businesses. Unlike angel investors, they typically do not seek to
fund startup businesses to help get them off the ground, but rather look at businesses that are
already in the early stages with a potential for growth. These are companies often looking to
expand but not having the means to do so. Venture capitalists seek an equity stake in return for
their investment, help nurture the growth of the company, and then sell their stake for a profit.

3. P2P Lending
P2P lending, or peer-to-peer lending, is a form of financing where loans are obtained from other
individuals, cutting out the traditional middleman, such as a bank. Examples of P2P lending
include crowdfunding, where businesses seek to raise capital from many investors online in
exchange for products or other benefits.

4. Personal Investors
A personal investor can be any individual investing on their own and may take many forms. A
personal investor invests their own capital, usually in stocks, bonds, mutual funds, and exchange-
traded funds (ETFs). Personal investors are not professional investors but rather those seeking
higher returns than simple investment vehicles, like certificates of deposit or savings accounts.

5.Institutional Investors
Institutional investors are organizations that invest the money of other people. Examples of
institutional investors are mutual funds, exchange-traded funds, hedge funds, and pension funds.
Because institutional investors raise large amounts of capital from many investors, they are able
to purchase large amounts of assets, usually big blocks of stocks. In many ways, institutional
investors can influence the price of assets. Institutional investors are large and sophisticated.

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Investors vs. Traders
An investor is typically distinct from a trader. An investor puts capital to use for long-term gain,
while a trader seeks to generate short-term profits by buying and selling securities over and over
again.

Investors typically hold positions for years to decades (also called a "position trader" or "buy and
hold investor") while traders generally hold positions for shorter periods. Scalp traders, for
example, hold positions for as little as a few seconds. Swing traders, on the other hand, seek
positions that are held from several days to several weeks.

Investors and traders also focus on different types of analysis. Traders typically focus on the
technical factors of a stock, known as technical analysis.

Investors, on the other hand, are more concerned with the long-term prospects of a company, often
focusing on its fundamental values. They make investment decisions based on the likelihood of
appreciation of a stock's share price.

List of traditional or common things investors invest in is below:

● Stocks: Investors can buy shares of publicly traded companies, which represent ownership
in the company and provide a share of its profits. Many brokers now allow for partial share
ownership, so investors are not necessarily required to own a full share of a company's
stock.
● Bonds: Investors can buy fixed-income securities such as government bonds or corporate
bonds, which pay interest and return the principal investment at maturity. The risk with
bonds is the value of the investment will fluctuate based on prevailing interest rates.
● Real estate: Investors can buy properties, either directly or through real estate investment
trusts (REITs), which provide rental income and may appreciate in value over time. In
addition, landlords may collect cash flow from operations for properties being rented.
● Mutual funds: Investors can invest in a professionally managed portfolio of stocks, bonds,
or other assets. The goal behind mutual funds is to have diversification and lower risk
compared to investing in individual, specific assets.
● Exchange-traded funds (ETFs): Investors can invest in a basket of stocks, bonds, or other
assets, similar to mutual funds. However, ETFs also have the added benefit of being traded
on stock exchanges like individual stocks.
● Commodities: Investors can invest in physical commodities such as gold, silver, oil, or
agricultural products, which may offer protection against inflation and other economic

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 risks. This can be traded as physical items or derivative contracts. Most often, these assets
have value because of their real-world use as tangible items.
● Alternative investments: Investors can invest in alternative assets such as private equity,
venture capital, hedge funds, cryptocurrency, art, or collectibles. Though potentially riskier
investments, the end goal is always the same: to own something that increases in value
over time.

What Are the 3 Types of Investors in a Business?

The three types of investors in a business are pre-investors, passive investors, and active investors.
Pre-investors are those that are not professional investors. These include friends and family that
are able to commit a small amount of capital towards your business. Passive investors are those
that are professional investors that commit capital but do not play an active role in managing the
business. An example would be angel investors. Active investors are those that commit capital but
are also actively involved in the business. They make decisions on strategy, senior management,
and more. Examples include venture capitalists and private equity firms.

2) Partners

Here are some partners that can help with prototype development:

● Manufacturers: Can make minor adjustments to existing products and provide samples.
They are more interested in larger volume orders.
● Big design firms: Have a team of engineers and designers, and can help with the entire
product development process.
● Product development companies: Can help with prototype development.
● Machine shops: Can help with prototype development.
● Engineering firms: Can help with prototype development.

3) Customers

Customers are involved in prototype development in a number of ways, including:

1.Defining customers
Before prototyping, it's important to define who the customers are and the situations they'll

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 be in. This can be done by creating profiles of target users, their needs, and their desired
outcomes.
2. Providing feedback
Customers can provide feedback on prototypes, which can help refine the product and ensure
it meets their needs.
3. Participating in the process
Customers can actively participate in the prototyping process, which can help ensure the
final product meets their requirements.

4) Advisors & Mentors

Prototype Development Advisor

The Prototype Development Advisor is a specialized role focused on guiding the creation, testing,
and refinement of product prototypes. This advisory position plays a crucial part in the early stages
of product development, ensuring that prototypes align with project specifications, meet design
requirements, and can be efficiently transitioned into production. An example scenario where a
Prototype Development Advisor's expertise is invaluable includes a tech startup working on a new
wearable device. The advisor would oversee the design process, suggest materials and methods
for prototype creation, and coordinate testing phases to evaluate the product's functionality, user
experience, and durability under real-world conditions.

Core Functions of Prototype Development Advisor

1.Overseeing Prototype Design

Example
Guiding a team through the CAD design process for a new automotive part

Scenario
In this scenario, the advisor ensures that the prototype's design meets both the functional
requirements and industry standards, optimizing the design for manufacturability and performance
testing.

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2. Prototyping and Material Selection
Example
Selecting materials and 3D printing techniques for a custom drone frame

Scenario
Here, the advisor evaluates various materials for their weight, strength, and cost-effectiveness,
advising on the best 3D printing methods to achieve the desired balance between durability and
lightweight design.

3.Testing and Evaluation

Example
Coordinating user testing sessions for a new mobile app interface

Scenario
The advisor sets up testing protocols to gather user feedback on the app's usability, identifying
areas for improvement before the final product launch.

4. Quality Assurance and Compliance

Example
Ensuring a medical device prototype complies with FDA regulations

Scenario
In this critical role, the advisor works closely with regulatory experts to verify that the prototype
meets all necessary health and safety standards, facilitating a smoother path to market approval.

Importance of a Prototype Mentor

1. Accelerating Learning Curve:

- A prototype mentor brings years of experience. They've navigated through the prototyping,

learned from their mistakes, and perfected their skills. By tapping into their knowledge, you can

leapfrog the initial learning curve.

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- Example: Imagine you're developing a new medical device. Your mentor, a seasoned biomedical

engineer, can share insights on materials, regulatory hurdles, and design trade-offs. Their guidance

saves you months of trial and error.

2. Avoiding Pitfalls:

- Prototyping involves countless decisions: material selection, manufacturing processes, user

interface design, and more. A mentor helps you avoid common pitfalls.

- Example: You're building a smart home device. Your mentor points out potential security

vulnerabilities, ensuring your prototype doesn't compromise user privacy.

3. Building Confidence:

- Prototyping can be daunting, especially when you're dealing with uncertainty. A mentor provides

reassurance, validates your ideas, and boosts your confidence.

- Example: As a student working on an AI-driven chatbot, you might doubt your approach. Your

mentor's encouragement and constructive feedback keep you motivated.

4. Expanding Your Network:

- A prototype mentor opens doors. They introduce you to industry experts, potential investors, and

collaborators.

- Example: You're developing a sustainable packaging solution. Your mentor, well-connected in

the packaging industry, introduces you to manufacturers and sustainability advocates.

5. Iterative Refinement:

- Prototypes rarely get it right on the first try. A mentor guides you through iterations, helping you

refine your design, functionality, and user experience.

- Example: Your wearable fitness tracker prototype receives mixed feedback. Your mentor

suggests tweaking the sensor placement and improving battery life based on user trials.

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6. Balancing Creativity and Feasibility:

- Entrepreneurs often dream big, but feasibility matters. A mentor helps you strike the right balance

between innovation and practicality.

- Example: You're designing a solar-powered drone. Your mentor encourages your vision while

reminding you of weight constraints and energy efficiency challenges.

7. Navigating Uncertainty:

- Prototyping involves uncertainty—technical, financial, and market-related. A mentor provides a

steady compass.

- Example: Your startup aims to revolutionize urban mobility with an electric scooter. Your mentor

advises on battery technology, scalability, and market trends.

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