Pitching for money too early can distract you from creating the best product. I know mine is sort of an unorthodox situation, but let me tell you a story:
When arrived at Techpeaks our goal for the first month was to form a team, come up with an idea, and then pitch for 25K euro. We had one month to do this. Just remembering everyone’s name was a challenge, especially with 3 Riccardos and 4 Alessandros.
Having done Lean many times before, I thought this month would be plenty of time. My attitude was “I can validate anything in a weekend, no big deal.” And it’s true – you can validate a problem rather quickly. The hard part is creating a business that solves that problem.
When you pitch to investors, they care about your business. How do you make money? How many people pay you money? We learned exactly what to put in pitch decks: problem, solution, business model, traction, team. If you look at these middle 3 parts of a pitch deck, you can see they take time. They take iteration to get right.
Pitching too soon doesn’t allow you the time to get traction and figure out what business model your customers respond to. In this early stage of a company, you should be creating or testing great product ideas. Pitching is a distraction. You can spend so much time saying “No that won’t work because we can’t make money” and pass on an opportunity to engage thousands, even millions of users.
After being together with my team less than a month, we created a pitch deck and got the 25K in the first shot, something not too common at Techpeaks. We had all the right materials: a strong problem, companies who agreed to test us, and a solid business model. After a month of creating tests and getting companies to agree to add us to their websites, we realized we were missing something: validation of our users. We spent a good amount of time before the pitch talking to one side of our market: the buyers. We needed this validation for pitching – it was the middle three parts of our slides. The response from them was really good, so we were encouraged to keep going. We received our funding and started building our MVP.
It wasn’t until a month later that we realized we neglected the most important part of our market: the users. These people were not the same as the ecommerce companies that would buy us. They had different problems. After interviewing tons of potential users, we found they did not have the problem we thought they did. We pivoted and found a different problem in the same area and we’re proceeding with that.
Techpeaks is unconventional to say the least. I know this can’t even be possible for most people, but if you think that you are far along enough to raise money, take a step back. Have you validated all parts of your idea? Do you have users? Are they coming back to your site often? Are you making money? If the answer is no, then this should be your focus. Don’t get distracted by money. Focus on your product, make sure users love it, and then find the money. Had we not been scrambling to make a presentation that sounded good to investors, we would have been validating and learning much earlier in our process. Just wait.