Let’s assume you’re in the other side of the table, an investor. Somebody comes up to you and pitches a tech idea that he or she believes will be very profitable sometime in the future. They claim that you will be receiving your money back with an interesting return simply because the idea is great! Now, just like any other good idea on the internet, anybody else can replicate it and make it even better so you, as an investor, realize that you don’t have any insurance for your investment; it’s too risky. You wonder what if you change it a bit and invest the money that you were asked for you could actually do the same thing and own 100% of the company! So what should tech startup entrepreneurs do before reaching out to investors and increase their chances of securing an investment?
Take the case of Uber. Kevin O’Leary, a Shark Tank investor, once said, “Uber is not a proprietary service, it has the largest scale (users) globally and that’s from where its value comes.” Today Uber is valued at over $50 billion dollars. Uber’s earnings are nowhere close to justifying this valuation however its massive user base is.
No financial investment necessary. After defining the problem, your solution and how it is different from others, go out there and meet with people that potentially can be interested in what you will be offering. Does it excite them as much it excites you? Do they perceive it as a solution in the first place? Do they really like it that they are willing to spread the word and invite their friends? Make those who show the eagerness that you were looking for be your most viable customers. These early adopters represent a sample that you will base your ideal target customer on. Ask for few minutes of their time to ask about their preferences, demographics and other needs. Then look for people like them.
Remember at this point we’re still investing time not money. Next step is to gather as many of those ideal users as possible.
BE PART OF OUR MISSION
Now that you’ve gathered valuable information about your ideal target users and know how to reach them, all you have to do is to come up with a very simple early application page through which users can sign up for an early registration. You can make it more interesting by offering an interesting reward to those who join you at this point.
MINIMUM VIABLE PRODUCT
While the previous step is running and users are signing up, you’re main focus should be to build a Minimum Viable Product (MVP). An MVP is the first version of your product that allows you to validate your idea, learn about your customers and potentially start generating revenue. Sean Ellis, the first marketer at Dropbox and founder and CEO of Qualaroo, emphasizes on the importance of exposing your product’s Core Gratifying Experience and communicating it in a way that optimizes its response. He suggests removing complexity from the initial user experience and messaging in order to highlight the core perceived value.
By this time you should have had a one landing page aimed to very simplistically tell your potential users what your value proposition is and convince them to opt in for an early registration by simply submitting their email or phone number. While this was happening, you’ve also been working on building a MVP. While this process may not be Free, it’s the fastest, easiest and most affordable way an entrepreneur can take to secure an investment and validate a product. Notice that this process takes few months to be completed which allows you to perhaps put a portion of your paycheck aside to cover for these expenses.
If the product is perceived valuable by your target users, the development process I mentioned above should allow you to acquire a good number of users that will serve as a strong argument or even an insurance policy for investors to give you their money.
Now back to our first scenario. Say the same person comes back to you with the same idea. This entrepreneur tells you that he had this interesting idea, he talked to potential customers, he built a MVP and today he has 10,000 active users and generated $12,000 in the first 3 months. Doesn’t this sound more attractive than the first offer? It sure does.
What else do you guys think entrepreneurs should do from idea till the time they approach investors?
Let’s build something great together!
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