For the past few months at Fabric, we've seen several entrepreneurs pitching Internet/Software concepts in the idea stage. They have brought investment decks, paper drawings, wire frames, and product descriptions. (Thankfully no business plans). They are all pre-Seed and they are all meeting with investors. Some of them have started building their product, but 50% have not.
The few that have not started building their product give different reasons for this. Common excuses are:
While these reasons seem to make sense, they raise a few flags with our team. Here's what we worry about:
You don't need to raise money to start to build your product
If you are committed, then you should put all your cash into product development now. That includes your credit cards and whatever you can borrow from anyone. We've seen Wordpress “products” built for $2k to test a hypothesis. The first version of Groupon was a Wordpress site. Why? Many investors won't even see you unless you have something live. That's a fact. (More reasons below).
Product development is different - and much harder - than sketching
We've had many people come to us with hand drawn wire-frames with very little detail. We're happy to see these things - it's better then nothing - but it's not enough. When you work on the details of your product through flows and mock-ups, you are forced to make decisions that you don't have to make when you are in sketch mode. For instance, you have to settle on database structure and priorities. You have to make left or right decisions in areas of your product that will impact other decisions down the road. You have to be super clear on your product description and you have to communicate the nuance of your thinking. You can avoid all that when you are in sketch mode. It's different. Very different. Who's telling you this? Dennis the Foursquare founder.
Learning fast is important
Many of your assumptions are wrong. (Einstein was wrong most of the time!) The trouble is, you won't find out until you put some part of your product in front of users and test. The longer you wait, the longer you stay in never land. It's nice in never land, but you'll have to get testing sooner or later. It should always be sooner because when you learn which of your assumptions are wrong you can correct - which of course is critical to progress. This is basic science and it's shocking to see so many people get this wrong.
Strong social products RULE the world and social products are different
To win today, you need to learn how to build social products. Building social products - or community products - is really different than building, for instance, a direct marketing product. You'll need to think about how to build context into your interface and, in many cases, where your growth model is dependent on viral coefficient you have to build loops - essentially social loops - into the core fabric of your product. The challenge? It takes time to learn how to build a solid product - a social product - for your users. You'll need to start as early as possible on this journey since there are many lessons to learn.
But what if my product requires infrastructure and complex architecture to work? What if it's a transaction product with a deep back-end?
It doesn't matter. Some of the coolest products was started without a backend. You don't need any of that stuff to prove some level of product/customer fit. Besides, never put a large part of your budget into tech until you are certain that you NEED that tech. You should test, test, test, before you invest in tech. If you worry about scale, just limit growth by capping your Alpha to x users. Also, you don't need real transactions to show investors that users would likely go through with a transaction. Be creative.
Most of the entrepreneurs we work with go after consumer Internet. They all need to raise more money to get past their next milestones and most investors care about traction. It's simply impossible to show traction without a product. To get traction, real traction, you have to figure out what makes your early adopters tick. You have to understand your different user segments and you have to identify your key users - the ones that drive viral growth. To do this, you have to build, test, learn, and iterate. You have to build a culture for rapid development and you have to train your product, design, marketing, and development team members to work on the most important aspects of your product. This all takes time.
So, get started on your product now. You'll need all the time you have.
It's really fantastic to see that people are pouring energy into the LA startup scene. Several new incubators have popped up and some, such as LaunchPad LA, are offering serious cash for young startup entrepreneurs. Thanks to people like Mark Suster, who has become a top five VC blogger over the past few years, the energy in LA is real and it seems as if the city might just explode with tech startups.
Working with entrepreneurs in the early stages (pre-seed) is very exciting. We're super lucky to have the chance to work on some interesting products with some amazing people. Watch this space for the next few months. I think you'll see a few strong companies unveiled. Thanks!
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