Funding is certainly an important part of a strong startup, but most definitely isn't the only important part of a strong startup. In fact, too many aspiring entrepreneurs believe that raising money is the only thing preventing them from bringing their ideas to life, which simply isn't true.
But if you don't believe us, read what Michael Hiles (General Partner at Cincinnati Crypto Fund LP and Director of the Cincinnati Founder Institute) has to say on the matter. In this syndicated blog post, Michael outlines the necessary steps that early-stage entrepreneurs should take before even thinking about raising money for their startups.
The blog post, "No, you probably don't need startup investment right now", originally appeared on Linkedin, and has been republished below with permission.
“I need money to make my idea work!”
Working in the startup world, this is something I hear over and over and over. Early stage founders come bouncing into the walled fortress of the accelerator office, all with bright and shiny ideas raring to go. They're ALL looking for startup investment.
"If I only had $11 million dollars, I could go build this thing."
That’s when my interrogation begins…
1. Have you transformed your idea into a functional business model?
If you don’t have a clear vision of what is supposed to be manifested in the real world (as opposed to the one inside of your skull), how are you going to avoid wasting everyone’s time including your own? Every business mistake has already been made countless times by others. Why should you and your startup investment partners suffer from classic mistakes because you didn’t fully do your homework? Investors are way too savvy in this era.
2. Is your business vision separate from your product vision?
This is an important distinction. Pitching product ideas on Shark Tank is super cool and a great dream (if you’re so inclined to give equity simply for the right to be on the show whether you receive funding or not). But if you’ll notice, even on Shark Tank, once the initial wow is over at the product level, the Sharks end up digging into the intrinsic business model – scaled production, distribution, etc…
These are just two of the hundreds of questions that need to be asked and answered before anyone considers asking for and receiving capital investment.
Most of the research you're going to need costs nothing but time and effort.
3. Can you show to potential investors that you have a concrete understanding of the value your product brings to what specific customer?
More importantly, which prospective customers will pay you for it and why?
A huge percentage of early stage founders fail on these simple points alone.
Yes, all startup business requires capital – at the right time for the right reasons. When it’s just one person and an idea floating around in their head, unless you’re already trust funded up, it’s not going to happen without doing the work.
Go do it.
Quit pan handling.
If you want to launch a startup that investors will love, then the Cincinnati Founder Institute can help YOU!
Copyright: Image by StockUnlimited