It’s easy to think that you have a billion dollar idea. But before trying to get an investor to fund your idea, you have to focus on your product or service and get as many customer as possible to find out if it’s even worth investing in it. In this episode I’ll tell you why you should focus on your product or service before talking to investors.
Here’s the transcript from this podcast episode, please excuse any typos!
In today’s episode we’re going to talk about why you should focus on your business’s product or service before worrying so much about the money that comes along with it. When I was fundraising for any one of my startups in the past, I realized that the most important piece of fundraising was having a product that worked really well, or having a service that people really loved. Remember, investors are called investors because they invest their money in hopes of getting a return on investment which means they want to earn a profit. So they typically don’t care too much about the product or service they’re investing in. Besides the fact that they’re going to be making money from this. So, it may not be the perfect investment for them it may not be in the industry that they’re in. But they see huge potential in it and they know that they can make money from it. So they’ll invest.
Of course in other podcast episodes that I’ve made you will hear me say that investors typically stick with an industry that they’re comfortable in, and that’s usually the case, but you will find investors who will invest outside of their industry, based on what they feel as though the potential is the problem here is, people think they can build something specifically to target investors to get funding, when that’s not the right way to look at. If I had $1 for every time an entrepreneur said My idea is going to be worth a billion dollars I know it. Fine, but you have to get to the point where you get funding. So, you have to find out if people actually like your product or your service before even thinking about getting funding. I think one of the biggest reasons why entrepreneurs want to get funding as soon as possible is simple. For example, let’s say you have a tech startup, and you have a CTO, Chief Technical Officer, he or she builds your platform from scratch, they’re a programmer, and they have a wife or husband and a house, and kids mortgage car insurance, health insurance and the list goes on and on. They have to pay all these bills. So let’s assume that you don’t have funding and your CTO needs money to pay the bills. How do you pay the bills? You can’t just go get an investor to give you money to build your platform.
So we’re going to also assume here that you and your CTO both have regular day jobs, and you’re doing this on the side, you should be focusing all your efforts on building the best product or service possible, and making sure you get as many people to buy the product or use the service as possible as well, too many people get wrapped up in the stardom and the fame of the big startups that raise lots of money and they’re worth billions of dollars, but they don’t realize that there are literally 1000s of startups that don’t get around the funding. So this is why I tell people to not focus on the money don’t focus on raising money don’t focus on how much you’re going to sell for don’t focus on things that are out of your control, focus on the things you can control your product is the number one thing that people are going to buy. So you have to make sure it is the perfect product or at least perfect enough to sell to people. Same goes for your service or your platform or your app. I think one of the biggest mistakes entrepreneurs make is they feel as though they know what the product should be or they know what the app should be. And they have this vision and this idea of what they want it to be and so they build it. But then they find out that people don’t like it exactly as it is. And they probably should have taken a step back and built something smaller, a prototype, an MVP, something that people can put in their hands and test out and give them feedback, especially if you’re working on the side because you have a job. You’re going to be already running a little slower than the competition that does have funding and can move a little quicker. But I always give my advice to keep your head down, keep your team focused and work on making your product the best that it can be.
Once you get beta users or beta product purchasers, people that buy your product, and you use that feedback and suggestions to make it better and iterate your product. I would show it around your city, get an initial localized user base of platform testers, or product users, and keep focusing on this localized user base, I wouldn’t even post any press releases or I wouldn’t even have any social media posts, I would not attract too much attention to the startup I would start small and local. Now when I say that you should not be thinking about the money. That does not mean that you should not try to find a funding source, by all means, you should definitely be talking to investors and forming relationships with them. I always tell entrepreneurs that they should be getting advice and suggestions from peers, mentors , advisors, board of directors and of course investors. All I’m saying is don’t get tied up for months on end pitching investors who are saying they’re going to write you checks but they never do. Because in the end, investors are always quote unquote interested. They love your product. But until they write a check. Do they really love your product?
So yeah, I mean, Come on, your goal is to find funding, eventually to scale your company. Yes, but you also have to be focusing on your product the entire time. Because if not, what you’ll find is that you have a great team, some traction and possibly revenue, great brand awareness through the press and media, but you’ll be lacking a thoroughly built product. It’s like a vacuum cleaner salesman from the 1950s going door to door, trying to sell a dustpan instead of a vacuum cleaner. By getting advice and suggestions from investors instead of asking for money. They may show interest anyway because your product might be rough around the edges but they might see the potential and want to keep in touch with you and then they might end up funding your business, but I feel as though most entrepreneurs don’t put enough emphasis on the product. For example, let’s say you built a new physical gadget, something that makes life easier. And you immediately put it up on Kickstarter with a campaign and like 3d pictures that you rendered out of a program, and you made a video and you just started trying to sell it, you might find that people don’t want to buy this product.
So let me ask you a question. Why didn’t you make a quick little prototype of this product. And literally, hand it to over 100 people who you do not know, on the street or at an event and watch them physically hold your product, look at your product, try your product and give you feedback on your product, because that’s the right way to do it, to get real feedback from real people. I still don’t know why people are afraid to get out there on the street, or at an event or in front of actual people and get their feedback. They think they know everything. Instead, they make a lot of mistakes along the way. This is why I’m saying you have to focus on your products. This means you have to remove yourself from it, you have to realize that this is not your product. This is a product for the markets, the market tells you what they want the market tells you what they need. So you should be looking at the market looking for a gap, what is needed out there, what piece of machinery or what gadget, or what platform. anything. What is it that people need that is not currently out there. If you do enough research, I guarantee you, you will find some type of version of what it is you want to build. It might not be the same thing. But it’s in this similar industry or a similar product something close to it.
The reason I know this is because I literally come up with a new idea, almost every single day, and I jot it down in my iCloud notes, then later on at night, I do a search on Google for that product, and sometimes I find something very close to it, just not quite what I imagined, or something that’s not even close to the same thing, but it’s enough to give me an idea of what I can do to improve that product. I’m going to give you an actual real world example of an idea, I came up with just a couple weeks ago. So behind my house in front of my garage, I have a cement driveway. And it’s also an alleyway where cars drive back and forth when they leave their house or come home, and in the afternoon the sun shines back there, and my office is down here so I like to come outside with my dog and get some sunshine, but the problem is my dog can wander off, and maybe get run over. Now I don’t want to install fences because it’s too expensive, and I don’t want to get one of those clunky metal or plastic kinds of pens where you can put your dog in it. It’s like an octagon of panels that you can put together. It’s just too big, too clunky, takes too long, and I want to have something quick and simple. So I thought, why not build something that’s retractable where I can pull like a plastic or metal fence, out of a spool like a round spool kind of like when you roll up your garden hose and you can kind of roll it up, or any other thing that you can roll up like a tape measure for example t measures a good example. And as you pull it out you can then make a piece of it sturdier by like, you know, I don’t know, that’s that’s the part that I’m trying to figure out is maybe putting a piece of metal in there that kind of puts it on the ground and keeps it stable.
Anyway, the point is I want to have some sort of retractable dog pen. And the more I looked online for something similar. I couldn’t find one. The closest thing I could find is a retractable gait, that you can put in your house to close up a doorway or something so your baby can’t fall down the stairs your dog can’t get into a room. I’m talking about a retractable dog pen or kid playpen that’s big enough to put in your backyard, your front yard or in a room in your house that can literally get put together and taken apart in seconds because it’s retractable. Now this may sound like a silly idea to you, because, you know, this is a first world problem, idea right it’s just like, okay, you need a retractable dog pen or whatever like yeah, it’s not that big of a deal I can do without it I’m probably not going to invent this product because the use case is very particular right it’s a very niche product, but you know people might like the convenience of it. So of course, I thought maybe I can build a prototype of this like a very simple I can go buy some chicken wire or that plastic fence material at Home Depot, maybe get like a spool or something that can let me wrap it up on there. And then maybe some kind of like mechanism in the school that lets me retract it, whatever it is I can probably put together a prototype for like 50 bucks or 100 bucks or something right. Of course, then I could try using the products in my backyard, or I can take it to different dog parks or regular parks and see if people wouldn’t mind giving it a try for a few minutes and letting me know what they think and what they think of the product. So that’s how I would go about actually testing this out. And if enough people said they liked it and they would use it, then I would ask them how much money would you be willing to spend on this item 20 bucks 50 bucks 100 bucks. And if I ask say 500 people or 100 people and they all give me the same number or close to the same number somewhere between like maybe 40 bucks and 70 bucks.
Well then maybe I know that at the price point is 4999 or something like that. Right. But remember, I’m getting the information from people. I’m not making the decisions myself and I’m also not making a Kickstarter campaign for this product until I know people actually want it. Why would I waste all that time and all that money and all that energy to make a Kickstarter campaign a video with perks and 3d renderings if nobody’s going to buy the product. Now sure I could have given you a ton of other examples platforms that I’ve come up with other product ideas that I’ve come up with, but I wanted to give you something simple, and real world example with my dog and a product that I can actually build so you can see why I’m not just gonna go build this product, and I’m definitely not going to go look for an investor to give me the money needed to build this product and market it That’s silly. I doubt any investors are going to want to give me money to build this product, and I’m not going to ask friends and family for money to build this product because then I’m just gonna be wasting their money. I have to do the hard dirty work myself, I have to decide first two people want this product. How much do they want to spend on it, and then I can go from there and start actually putting it out there and seeing if people actually buy it on Kickstarter. Once I have some initial sales and I see the money coming in, then I can improve on the product and make it better, build a website, have the social media pages kind of start blasting it out there maybe getting a celebrity to buy one, or give one to celebrity to endorse, or an influencer online, and really kind of start popping sales. From there, the money will come investors will want to invest, if you find the right ones maybe you can go to a pet store and see if they want to sponsor my product or if they want to put them in the stores for sale, maybe I don’t need an investor maybe I can just grow the business naturally, or maybe a pet company just wants to buy my product or license it. Either way, by focusing on the product or the service and not the money. That’s the best way to grow any company from the ground up. I would love to hear some of your ideas, feel free to reach out to me on my website Jason sherman.org, or find me on social media and pitch me your idea I want to know what kind of cool ideas you got maybe I can give you some insight as to how you can build this product or service without finding money first.
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