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Building Something vs. Proving Something

Rob Go
November 4, 2019 · 2  min.

One of the biggest rookie mistakes I see among founders pursuing seed rounds is that they’ve spent too much time building something vs. proving something.

Increasingly, seed rounds occur after some sort of pre-seed or at least some period of bootstrapping. During this time, the founding team has probably invested at least some money and a lot of time and energy in moving their company from a concept to something with a bit more meat. But the way the market values this early work can vary greatly.

I’m often surprised by how much effort seed stage teams put into building an early product and how little credit that receives from investors.  Conversely, I’m also often surprised how little can be built that still gets investors excited about an opportunity.

In most cases, the two most important things to prove early on are 1) that the founders can attract A+ talent and 2) that there are signals of market demand for their product.

I have a related framework that company milestones fall into two buckets.  Things that are hard but inevitable and things that are hard and uncertain. You get almost no credit for doing things that are hard but inevitable, and tons of credit for doing things that address important uncertainties. And the ultimate uncertainties for a seed stage company are around talent and customer demand.

Although this seems obvious, you’d be surprised how many early stage companies immediately invest too much time and energy to build a product that doesn’t really prove anything. And to do that, founders either spend way too much money on a third party dev shop, or hire a “lead engineer” that is capable, but not really a star.

Instead, I think founders should focus on bringing on one or two star players around the company, even if it’s just as an advisor or part time team member.  The goal is to prove that you know what great talent looks like, and that you can get them into the orbit of the company one way or another.

The other priority is to generate the most cost-effective signals of market demand possible. In many cases, this can be done with very rudimentary software, or fairly generic landing pages coupled with human intervention on the back end. Some early customer acquisition data may also be determined by spending against an offering that is described but doesn’t actually exist.

In some cases, the quality of the product IS the thing that is most uncertain. But those cases are much rarer than you’d think, and realistically, these rounds either get done pre-launch based on the track record of the team or after there is some early user traction.

Founders without a strong track record of building great products feel the pressure to build something to prove that they can do it. But this is a trap. Prove market demand in as low-fi a way as possible, and invest your energies in bringing great people into your company’s orbit.

 

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Author
Rob Go
Partner

Rob is a co-founder and Partner at NextView.  He tries to spend as much time as possible working with entrepreneurs to develop products that solve important problems for everyday people.