You’re an aspiring entrepreneur. You’ve been working on your idea for a few months and released your first product which, however gnarly, is proving that you’re not crazy and there may be a there there.
Now that the core of your team is established, your early product is humming along, and that all important validating user response is coming in, you’re out on the fundraising trail. You’ve read all the articles, got warm intros from your other entrepreneur friends, and are finally sitting across the table from an investor you’re hoping to work with.
So far, it’s going well.You’ve established some rapport by swapping Burning Man stories (this is Silicon Valley, after all), and they’re digging your high product concept. They think the first version is pretty neat (although of course they have ideas for how it can evolve), and they like the revenue potential.
But then, it comes. The question about that thing that you’ve been hoping to avoid. It’s that one metric that scares the crap out of you. The metric that makes you wonder what you’re doing wrong. The metric that makes you question the fundamental viability of your idea. The metric, in other words, that you would give anything not to talk about.
Every early stage company has this metric. In fact, most have a bunch of them. As an early stage investor sitting with startups day after day, the question isn’t so much whether the company you’re listening to pitch has one of these big ugly warts, but how they choose to address it.
Here’s what we love to see. We love it when an entrepreneur gives us the big idea, validates that idea with the real, quantitative evidence they’ve been able to garner so far, and then lays out a roadmap for what’s next that absolutely owns whatever big problems they’re experiencing.
Great big funnel of visitors but low conversion to registered users? Here’s the plan. Tons of engagement from super users but not a ton of people coming in the door. Here’s the plan.
Early investors are, at a fundamental level, making a bet on two things. The first is your vision of the future. The second is your ability to make that future come to life.
Inspiring confidence around that second dimension is not just about demonstrating all the success you’ve had, but about being sophisticated in your identification of weaknesses and savvy in your strategy for remedying them.
Too many early entrepreneurs try to sweep their biggest challenges under the rug, for fear of losing investor interest. The best recognize that it is their ability to overcome those challenges that makes them so appealing to investors in the first place.