funding, advertising, processMy friend has a idea that he thinks can become a great product. He can’t spend time on developing the idea so we agreed that I will run with the ball for now and we’ll be partners 60/40 with him getting 60% of the equity of the company.
As far as funding is concerned, he tells me that he is getting a $50,000 grant due very soon (Dec 2016) but other than that there isn’t seed money funding.
He does not have a prototype or even is close to having one.
Despite this he asks me to do the following…
My question is, is this the right order to do things? I would of thought to hold off doing steps 1-4 also, to wait to get the word out until we get the grant and then get a prototype working before looking for VC’s and investors so we have what to show them and also we can prove to ourselves that it works.
Assuming that what I write is accurate, what is the way to go about doing this?
Thank you.
Expanding on what I threw in as comments, you usually want to find buyers first, then worry about funding, and finally worry about building.
It can seem counterintuitive at first but that order actually has it correct. If you build first, you may very well end up in a situation where there’s no funding and no clients down the road. If you fund first, and then build, you may realize down the road that there are no buyers to sell to. There are mass graves out there full of startups with fell for either trap, and almost as many stories of investors that poured money into a project that was dead on arrival.
So find - and prove - your addressable market first. Doing so will literally solve 95% of your problems. Whatever your funding needs are you’ll find plenty of opportunities, and you’ll never have the stress that comes with building something that you’re not sure will sell or the disillusion and the cold shower that come when the sorry realities of the market kick in after you’ve spent months believing your product will sell like hotcakes.
I’d stress that you want actual clients rather than buddies and friends who tell you “yeah, I’d buy this.” You’ll also find plenty of stories out there of businesses that started with founders who were confident that they’d get buyers without realizing that, come the moment of truth where the folks they asked need to pull out their checkbook, they discover that “actually, this cool thing we told you we’d buy isn’t as critically needed on second thought” or “ouch, I hadn’t realized it would be that expensive, maybe it’s not that important after all.” That is why you want some kind of written commitment: a promise to buy at (perhaps even up to) a certain price point by email is fine.
You don’t need a functioning prototype to sell. You can make do with a couple of slides that show key screens or whatever. Or some visual prototype built with Balsamiq or equivalent. Or really with nothing at all, in practice - visual help often distract from the business goal and the problem in need of a solution. Your ideal early adopters will have an “OMG this here is such a pain, please shut up and take this money as an advance payment to sort it out” type of problem. You need to find them, and the way to do that is to actively try to meet them.
All content is licensed under CC BY-SA 3.0.