The product lens(cdixon.org)
cdixon.org
The product lens
http://cdixon.org/2012/12/02/the-product-lens/
7 comments
This might be why it is so depressing when someone with deep domain knowledge and insights in a product area (say, hardware, or security, or something else like that) decides based on a perception of the funding market to do something else entirely, like another local/social/mobile photo sharing site for cats.
I know of at least one awesome company with great engineering founders who were for some reason working on a consumer application for a while, before pivoting back to a harder engineering problem. They've been quite successful so far at the latter, which sort of justifies how sad I felt when they were doing the other thing.
I know of at least one awesome company with great engineering founders who were for some reason working on a consumer application for a while, before pivoting back to a harder engineering problem. They've been quite successful so far at the latter, which sort of justifies how sad I felt when they were doing the other thing.
What Chris is saying is that there are two different lenses. It's almost impossible to have a correlation between these two - your customers are looking for different things than your VC. I always split my product into 2 - the main one for customers and a second one for VCs (with a more vision, sometimes different business model). When I raised VC money I used a different product demo than the beta which was already in use by the customers.
The best investors should understand this too, which is why you should pay special attention in the financial lens to go after only smart money. Otherwise, you could be pushed for more vain metrics rather than the real ones, like product & customers.
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36 points and not a single comment? Well, I'd summarize it all by just saying: focus on your customers more than your investors.
High upvote:comment ratio is a quality indicator, IMO.
Or voting cabals; it goes either way.
I wrote three different comments and deleted them all, really didn't have much to add, except, as a product guy who's never raised money before and doesn't know much about it, these types of posts are incredibly insightful and make me hopeful that a product focus is seen as a positive in the eyes of investors.
Should really go talk to someone about this stuff, or at least read a book.
Gotta know the rules before you can break them.
Gotta know the rules before you can break them.
or, the most important 3 things about product development:
customer, customer, customer
1) If you can't build your product with a few $100k (or less), it is probably not that great of an idea. Google, Facebook, Myspace, Amazon, Apple, Microsoft, and more were all built on very small initial budgets. And no, these were not edge cases - thousands more successful startups were lean from the start.
2) If your business plan demands millions in financing, its probably because you are buying customers / marketing. I know very well the value of both, but none of the aforementioned companies launched with marketing budgets. Step 1: build prodcut; step 2: scale. You may also be building some magical super computing cluster that will revolutionize search, but we all know how Color turned out.
3) You have raised an excessively large round because VCs benefit from it. Schemes like "2 and 20", "10x exit" and so forth mean that VCs try to overvalue companies from the start. Raising capital is also a good way to dilute founder equity. VCs also have to make investments, or else their capital collects dust. This means they will try to invest as much as they can in promising companies, just so they aren't forced to invest the cash on less promising ones.
TL;DR: it is in a VC's best interest to pump as much cash as they can into your company (assuming they think they can flip it for a profit). Always start small, test for traction, then scale.
*Keep in mind we are talking about software here.