Catch an investor's attention and prove you can do the work
Big ideas are a dime a dozen in the startup world. No investor is willing to sit through a longwinded explanation of an app idea that you haven't fully fleshed out. What separates a good investment from a dud is the startup team's ability to execute on the idea and show proof that there is a strong market fit.
We realize there is a Catch-22 that keeps many founders stuck in selling an idea. It takes money to build a prototype; but you need a prototype in order to raise money.
Just remember that investors are evaluating every conversation for two things: risk and opportunity. And a prototype doesn't need to be a smooth fully functioning app with a gorgeous UI. It can be a bare-boned clunky model that does just enough to test assumptions about the business model and usability and prove to an investor that the opportunity outweighs the risk.
In order for your startup to be the one to move beyond this money/product conundrum you will have to get creative.
For non-technical startup founders, a prototype should be even more of a priority in the pitching process. The biggest hurdle that you'll face is proving to seasoned investors that despite your lack of development skills, you have the technical understanding and vision to hire a strong team and see the product through from idea to prototype to fully functioning product. Showing that you've already passed the biggest hurdle will help alleviate insecurities and reduce the degree of risk in investing in your company.
5 Elements of a Prototype Investors Will Love
Has built in mechanisms for user feedback
Before building your prototype, ask your mentors and potential investors what metrics will matter most during the fundraising process. Depending on your industry, competition and technology - this data could be widely varied. Understanding which types of feedback will help you during your pitch will help you choose a single KPI (key performance indicator) to be tested in your prototype. The ability to test user feedback will show potential investors that you are thinking about the user and have a way of gathering their feedback and incorporating it into your development process. This is yet another way to reduce risk and demonstrate that you are capable of avoiding major startup pitfalls.
Shows iterations over time
Prove that you are taking feedback from users and mentors into consideration by showing the evolution of the product over time. From sketches to wireframes, to early mockups and finally a functioning prototype, if you can show your team has incorporated what you've learned into newer iterations of the product it will show that you are already on the path to a successful product. Demonstrate how you've tested with paper prototypes and put your internal process on display. Show your plans for future prototypes and the thought process behind how you'll transform into the final product.
Focuses on the core differentiators
If your product is similar to one (or many) on the market, be sure to identify core unique differentiators early in the process and put them front and center in your prototypes. You need to show off these features and prove that what makes your product different is actually adding value. Proving that you can go head-to-head with established competitors and can hold your own against newcomers in emerging markets will be an important hurdle in your fundraising process.
Has a clear user pathway that mirrors business goals
Proving that your product is built on a viable business model will be the biggest challenge of any prototype. You'll need to show that the product itself is thoughtfully designed to take a user through a simple and direct pathway from user acquisition to profitable action. Avoid creating user flows that are long and convoluted where it's likely a new user will get bored or distracted and leave without capturing their information. It's also common for prototypes to show off the many "cool" features that they plan to have that are completely unrelated to the business model and profitability. While users might think it's fun and helpful, a smart investor will see this inconsistency as a major red flag.
Know the limits of your prototype
While investors are exploring your prototype it's important to tell them all of the things it can do, but it's more important to tell them the things it CANNOT do. Be honest and upfront about what features and elements you didn't include (at least not yet) and the thought process behind choosing to exclude them. Investors often have to be reminded that a prototype isn't a final fully functional product. Keep expectations low by being completely transparent about your iterative process. Be able to describe what your plan is for adding and upgrading features and what feedback you need before moving forward on key elements. Before handing anyone the prototype, be clear about your priorities (testing, proof of concept, gathering pre-launch signups) and how those priorities tie into overall business goals.
Read the Get Funded Series:
- PART 1 (THE STARTUP TEAM)
- PART 2 (THE OBSESSION)
- PART 3 (THE ORIGIN STORY)
- PART 4 (THE MARKET)
- PART 5 (THE METRICS)
- PART 6 (THE PROTOTYPE)