(a) close a sale with a customer who already wants what you're selling, or
(b) sell to someone who's not even aware they might want a product like yours, much less why they should buy it from you?
Every day I meet entrepreneurs who beat their heads against the brick wall of (b) while giving little or no time to (a).
Here are just a few examples:
1. Raising Money
Andy and I make every effort to be transparent about our approach to early-stage investing. We're both active bloggers and social media users. We list most of our existing investments on our website. We have a "what we do" page that tries to spell out in very simple terms what we look for as investors. We're on AngelList, LinkedIn and a dozen other places besides.
In addition to many the well-crafted + thoughtful investment inquiries we receive at Founders Co-op, we also get silly amounts of unsolicited financing requests -- promoters of South American gold mines, Chinese import/export deals and similar "once-in-a-lifetime" investment opportunities seem to think their "to whom it may concern" inquiries will spark our imaginations and open our wallets.
These unsolicited funding appeals are laughably off target, but I see inexperienced entrepreneurs do the exact same thing with their investing outreach all the time.
Whether you're raising angel or VC money, the single most important thing to remember is that investors are actually just people. A fund is nothing more than a legal wrapper for the human beings behind it, and those humans make decisions based on a very personal set of patterns, heuristics and habits developed over a lifetime of experience.
The shortest path to a successful fundraise is to show how your company is leveraging patterns of success that relate directly to those that made your target investor money in the past, and/or fit their current worldview on what's coming next.
If your business touches themes they love and markets they understand, and your team has the mix of business- and product-building skills they've seen win in the past, your job is (relatively) easy:
All you have to do is convince them that you're going to fucking own the market you're tackling -- and that it's a market worth owning -- and they might write you a check (as long as they don't have a conflicting investment already in their portfolio).
If you make the mistake of thinking of investors generically as fat, flapping wallets that will open for any risky bet if you just say the right magic words, you'll waste a ton of both your time and theirs. Raising money is hard enough, but it's practically impossible if you have to educate investors about your market and why they should care before you even get a chance to pitch.
Product-market fit it as important in raising capital as it is in building your business, which brings us to the second example...
2. Finding Product-Market Fit
There's not much to say here that Eric Ries and the Lean Startup community haven't already beaten in to entrepreneurs' collective consciousness, but I'll add a few comments from my own experience.
Like investors, entrepreneurs' actions are informed by a very personal history of views, habits and lessons learned, acquired over their lifetime of experience. By definition, entrepreneurs seek opportunity -- often using analytical frameworks that take them far beyond their personal experience base.
The error happens when entrepreneurs extrapolate patterns from their personal experience base to domains where there is no data to suggest that they apply.
Many, many times, I see entrepreneurs fall in love with an "opportunity" in a market that has no demonstrated appetite for their solution. (My own personal Waterloo along these lines was Andy's and my experience at Judy's Book, about which I have written at length).
Because they love their own idea so much -- and are so convinced it is the right thing for the market -- they take on the "education selling" challenge with the zeal of an evangelist, despite a demonstrated lack of interest on the part of their target customers.
Markets change, innovation happens and disruption ensues -- some level of market education is often required for a new service to thrive -- but evangelical selling is a brutally hard way to build a business. The classic investor cliche -- "be a pain pill, not a vitamin" -- is a good place to start:
When you talk to prospective customers about your offering, do you have to first educate them about what problem of theirs you solve before you get to the part about why your solution is the right one?
If the answer is "yes", you're either talking to the wrong customers, or you have a huge uphill climb in front of you.
Raising money and building a successful business are both brutally hard. Make your life easier by:
- solving problems that actually need solving
- selling to customers who would happily pay you *right now* for a solution, and
- building a team -- investors included -- that shares your passion for solving those problems better than anyone else in the world.