When Fundraising, the Company is the Product

Building a novel product and bringing it to the world to address customers’ unmet needs is a big job. And simultaneously, building an innovating company to enable that novel product’s success is ANOTHER big job. The two are related – even overlapping – and that sets startup leaders (you!) up for getting the two confused and mixed together.

Startup founders usually begin their startup journey with a clear vision for the product they are creating that addresses the unmet need they have identified. Good founders do detailed customer discovery to understand their future customers’ needs and requirements, think hard about how they can build an MVP (minimum viable product), and then start executing on it as resources allow, develop a marketing plan and supporting materials, and sell, sell, sell.

Yet founders often find themselves struggling to raise the money they need to support their startup through its product development, commercial launch, and scaling phases. As they work hard on building the operating business of the startup – and especially pouring themselves into all the arduous and detailed work of crafting a fantastic new product offering – they don’t always realize that there is a remarkable parallel to the work they need to do on the fundraising front.

The difference is that when fundraising, the “product” is the company!

To fundraise successfully, you must break out of your intense focus on building your novel product and operating your business and apply many of the same concepts and techniques to the fundraising process. In other words, when selling to investors, think of your startup company as your product.  What are the characteristics of your “product” (aka startup company) that will appeal to your “target market” (aka the type of investors)? What does the “competitive landscape” (aka universe of similar startups) look like, and how does your startup’s “value proposition” compare?

To illustrate thinking about your startup as a product, consider the following:

• What is the significant unmet need your startup is addressing (market segment, target market size, evidence of need)?
  
  
• What are the features (team strengths, product concept, and value proposition, secret sauce, IP, special expertise, data showing your product works, business model, financial projections, early commercial traction, business performance metrics like revenue ramp, gross margin, and customer acquisition costs) of your startup?
  
  
• What is the value proposition (required investment, evidence of de-risking, competitive advantages, unit economics, breakeven analysis, potential to scale into a huge business, reasons to believe in the potential of a 10x exit) of the startup?

And, like when you are designing a product, focus on understanding the needs and characteristics of your target customer. In this case, when fundraising, your target customers are potential investors:

• What market segment are you targeting (angel investors, VC investors, PE investors)?
  

• What are potential investors’ specific needs, and how does your “product” fit those needs(s), such as industry vertical, investment stage, target investment size, and investment thesis?
  
  
• What details do you need to provide about your product to answer common investor questions?

Now that you have your product and your target market defined, you will need to develop some marketing materials to effectively tell your story.  Those marketing materials will look like pitch decks, financial models, executive summaries, and other materials that will help your potential customers (aka investors) understand and get excited about the value proposition of your startup product.

Why am I explaining the parallels between a startup’s product(s) and the “product” you are selling to investors (aka fundraising)?  Because too often startup founders/leaders are so busy trying to do both the full-time job of building their startup and the second full-time job of fundraising for their startup, that they end up trying to quickly repurpose their product information and the story they tell potential customers into an investor story. Since talking about the product is only part of the startup’s story, this approach causes the common investor feedback that startup pitches focus too much on the tech/product and not enough on the business. It also tends to create confusion among investors who are not potential buyers of your product and are not as familiar with the relevant jargon that will be familiar with the target decision-makers of your future customers.

So when you are trying to build and sell both a breakthrough product and a fast-growing startup, remind yourself which “product” you are selling when you shift from working on product development and business operations to fundraising for your startup. Focus on the right metrics. Provide the right relevant context. Think about the needs of your target audience. And, don’t mix the two up!