I chat with rising entrepreneurs regularly. Some have nothing but an idea. Some have built an MVP and are fine-tuning it based on customer feedback. Almost none of them have validated that customers are willing to open their wallets and pay for their product or service. Translation: they don’t have product–market fit.
These founders usually ask me about raising money from investors. A few hundred thousand is what I usually hear. To be clear, there’s nothing wrong with raising money. Progress requires capital. Building an MVP and modifying it based on customer feedback takes time and energy, which requires people. People don’t work for free. Customer revenue this early in a company’s life cycle is minimal. This means founders need capital from other sources, such as investors.
I usually ask these rising entrepreneurs a few things:
- Do you have a working product or service?
- How many paying customers do you have?
- How do you plan on spending investors’ money?
These questions usually spark a good conversation. My objective is to get them to focus on their goal and see if raising money aligns with that goal.
Raising investor capital is important, but early-stage founders should focus on developing a product or service that customers are willing to pay for. Investor capital should be viewed as a tool to help them reach their goal, not the goal.