investment, investors, market-researchIs it a good idea or a waste of time to try to get investors for the start of the prototype creation, when the project is only on paper?
There are a few things in play:
Who is the investor, and what is there risk tolerance? An active angel investor will likely have a higher risk tolerance than someone used to investing in businesses that are already profitable.
The complexity of your proposed product/service will come into play as well. If your plan would have been fairly simple to prototype and you haven’t done it, they will wonder why you haven’t yet and trust you less to work with their money. If it’s fairly complex and/or costly to prototype, it will be easier for them to understand why you’re asking for funds first.
How well can you demonstrate, without having gotten to the point yet where you have a prototype, that you know this business inside and out, you know how to run a business period, and you will effectively use the funds they’re potentially giving you?
Do you have any past experience with a startup (maybe even in a similar market?) that you can leverage to make this deal more appealing?
How good of a salesman/negotiator are you? Do you have a great pitch for this?
Ultimately, a prototype would be a significant asset in pitching your business. It shows that you’re taking this seriously and likely have at least some understanding of the business itself to have gotten that far. So if you CAN do a prototype before asking for funds, you’ll be in a much better position during negotiation.
Anything you can do to lower the risk to their investment is going to make the deal more appealing. But under the right circumstances, (and offering the right amount of equity, etc) the risky deal can still be appealing (and sometimes risky is even more appealing than safe as long as it’s risky for the right reasons) because it has a higher potential gain to go along with the higher potential risk.
Really depends on the investors, your pitch, and the trust the investors have in you to execute what you’re asking funds for. That said, the more risk they take the less leverage you have, and as a result, you are likely better off getting to the point that you’re in the position to get the best deal possible.
One of the hardest things to convince an investor is that you have a vision, and that you can deliver on that vision.
A prototype goes a long way to demonstrating both your vision and your ability to deliver on it.
If you are confident in your ability to convince them without a prototype, or you have previous experience that demonstrates your ability to deliver and you can paint a picture of your vision in their mind, then you might be able to get investment without a prototype.
So yes, you can try to get an investor without a prototype. You may have a harder time convincing them, but it’s certainly been done before and will be done again.
Unless you have a demonstrable track record of going from idea to product and that there is a market for that product you will not have nearly as much success.
Before even building a prototype do the market research.
Before deal the principle(investor) better u deal to someone u know, they will reject your proposal. If u can change his mind from negative to positif thats means your target become more then 50%. Thats means ur main target principle will approve by them. But!!! Most important is u need to know what the negatif posible will be handle. Means, u need to use Basic Law Of Bisness…that is 2 category.
Projects tend to go through multiple failed prototypes (not quite good enough) before hitting the right prototype. The feedback from the prototypes should answer most of the questions about how you’re going to do it and help improve the concept. Which reduces the risk in developing the end product.
Bear in mind that prototypes don’t need to be functional, as long as you can fake enough to get the idea across and illicit positive and negative feedback.
If you go to an investor without having thought about every possibility and covering the bases then the risk factor for everyone will be higher.
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