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What is a Proof of Concept?

Mary McMahon
Updated May 17, 2024
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A proof of concept is a common idea in the business world, where entrepreneurs and start-ups demonstrate that a company or product is financially viable. Usually, this involves extensive research and review, and it is submitted as a single package to concerned parties. The proof of concept is also used in the arts, in research and development, and a variety of other fields, although the procedures remain much the same.

When a company is asked to invest in a another company or project, usually a proof of concept is required to demonstrate that the proposal is fiscally sound. For example, a company interested in developing a new suite of software would look at market demand, feasibility of the project, projected cost, and other factors. This analysis would come together to show how the concept will play out in the real world.

Sometimes, making a proof of concept requires creating a minimalist prototype, to show that the idea or device could be made to work. Especially in the digital arts, many companies experiment with short animations or films to see if a concept is viable, and present these films as proof of the concept. In other cases, a company may build a small representation of a new type of equipment to show potential investors how it might look and feel.

The project usually begins with the company background, where the history of the company is examined. When working internally, staff members might ask if the proposed concept fits in with the missions and goals of the company. Externally, potential investors look at how the company has performed in the past, what the proposed product or service is, and if the company has the resources to develop the concept. Then, the market for the product is examined. Investors look at what kind of regulation might be expected, how saturated the market is, and what kind of demand there has been for similar products, as well as what sort of competition exists.

Usually, a proof of concept includes an examination of the revenue model as well, with companies showing projected revenue from the product and service, and indicating development costs, long term financial projections, and how much the product or service will cost to maintain and market. Hand in hand with this goes a review of the intellectual property rights involved, and whether the company may need to pay for licensing.

This type of analysis is an excellent way for a business to evaluate itself internally, as well as look at proposed acquisitions and projects. Some businesses specialize in offering advice and evaluations of new concepts, assisting companies in the path to making the right decision. Ultimately, a proof of concept is designed to reduce the amount of uncertainty involved with a new project or acquisition.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By anon340191 — On Jul 01, 2013

What will be the proof of concept for a software that is going to be developed?

By RepentPeace — On Mar 17, 2012

Prove these words are from our mind? See? You believe it but can't prove it! Prove your opinion exists? You can't. The simplest proof.

Alas. Minds did not create this. Our minds, bodies, etc. were created. Allah (other language for G-d) is a Supreme Being. Only One G-d can exist. We cannot prove logic exists, either. Then why seek logic? The logic that only One G-d can exist is best. Nothing else is more critical. Prove all that exists inside of us. Otherwise, there would be no need to prove anything. Crazy.

Seeing is so deceptive. We believe what we can't see. What is sure reality? The Day of Resurrection. Proof is not what you believe. Self-defense is your deceit until death proves you guilty.

By anon194925 — On Jul 09, 2011

This is also a "Proof of Concept". It's designed by The Alliance and it looks pretty cool.

By anon141909 — On Jan 11, 2011

Proof of Concept is not your feasibility study. What an investor/banker looks for is actual proof of concept. Meaning orders or actual demand for the product or service. You must prove that people want your product.

By anon86991 — On May 27, 2010

I think it is not uncommon for people to confuse the idea that a Proof of Concept may involve building a prototype or conducting a demonstration, but that is in itself not the PoC. The PoC is about the Vendor's Viability.

By tommyt — On Sep 10, 2009

should i do a Proo of Concept for an idea for a television show before i pitch the idea to production company? what can i do to ensure they won't just take my idea and do it without me?

By anon37357 — On Jul 19, 2009

How PoC be done for a company looking into invest in a software, which increases it productivity. The objective of the software to increase productivity and not to increase revenue, which mean the benefit of the software cannot be measured monetarily

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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