Last week, while waiting to board a plane to the On Deck Sports and Technology Conference in New York, I was still making tweaks to the product that Automated Insights was about to launch in front of investors, media and potential customers.
Instead of creating a PowerPoint presentation that explained what our product would do and why people should want it, we built the product.
In the startup world, PowerPoint presentations are no longer enough.
Technology has made it easier than ever to start a high-tech company.
But now the expectation from investors and customers is that the potential product or service must already be built and working, and ideally have loyal customers singing its praises.
Investor Jay Jamison said that for every 20 entrepreneurs that pitch to him, 19 have a working product or prototype. The one that doesnt is starting with a deficit.
Entrepreneurs need capital or customer revenue to build a product, but have to have a product built before they can get capital or generate customer revenue.
I believe the only way you can raise money without a product is to be someone coming out of a successful startup or a second-time founder with a success under your belt, said James Avery, founder and CEO of Adzerk, a Durham-based ad server company.
It used to be that the right idea and the right business plan were enough. Since thats no longer the case, many entrepreneurs adhere to the Lean Startup model, which uses the concept of a minimum viable product or MVP, a bare-bones version of the final offering that has enough functionality to prove that there is a market for the product.
A prototype, MVP or similar is essential, and nowadays, having an early customer is even more so, says Daniel Chalef, founder and CEO of Raleigh-based KnowledgeTree. The mantra for enterprise startups is around product market fit. Will somebody buy your product? You cant answer that question without one.
And the show-dont-tell concept applies to all levels of startups.
I had a working prototype even before we applied to (Triangle Startup Factory), and I do think it is a requirement before raising funds especially if you are a first time entrepreneur, said Anil Chawla, founder and CEO of Archive Social, a Durham-based social media archival and storage solution company, which won a $41,000 grant from NC IDEA in 2012 and recently graduated from accelerator Triangle Startup Factory. Nothing builds credibility like showing that youve been able to execute on both the product and the market. Very few entrepreneurs seem to get funded on a concept these days.
The days of starting a conversation with Ive got an idea for a product are coming to a close. Before beginning, ask yourself these questions:
Can I build it?
Can I sell it?
Can I sustain it?
If you can answer yes to all three, go out and do it.
Joe Procopio is a serial entrepreneur, writer and speaker. Follow him on Twitter @jproco or joeprocopio.com