Also. No. When I say data, I am not asking you to fill up two slides with Google search on the size of the market you are planning to enter into. Always assume that any investor understands the market is huge and offers immense potential for any business that is able to tap into it. When I say data, I am talking about the only data that truly matters. Traction!
The most common theme I get answer requests for, on my Quora profile, revolves around “How do I find investors for this amazing business idea I have?”
I answered a few early questions, and then I stopped. How much can I repeat myself; I had started to sound like a broken record. Lately, I have started answering those questions again. There is an attempt made to answer each question with a fresh perspective, and possibly even from a different viewpoint altogether. Anything that can help budding entrepreneurs realize what truly matters in any business, and help them stop wasting their time and energy into chasing investors at a stage where most of them would not be able to elicit positive feedback.
A BUSINESS IDEA IS PRETTY MUCH USELESS. MOST OF THE TIME.
I received some ‘hate?’ the last time I said something like this, here on Medium, and in emails, and that’s fine. Whether you agree with me or not is totally on you, I would still try to help put things in the right perspective. Possibly save you a lot of heartache, time and energy.
A lot of times, when entrepreneurs come to me to talk about their business idea, they think they have tried to put them in the customers’ shoes, and they are confident that the solution they have is going to completely solve the ‘critical challenge’ plaquing the customer.
Now, there are a few things wrong right here, and that is where most of the mistakes get made.
First, they feel strongly about the challenge based on a one-time experience they themselves had while undergoing a similar experience. But if that is a challenge that even needs addressing or not is not contingent on a one-time experience. Let us take an example. Say, Uber’s customer grievance redressal system doesn’t/didn’t work well, and while experiencing that pain-point, you realize that there would be a lot of customers like you who have gone through a similar harrowing experience. Great, you have a business idea now, don’t you? No! I am a power Uber user who takes maybe 100+ Uber rides every month. The number of times I feel the need to connect to customer support? Maybe once or twice. Is it, then, that big a challenge for me that I would consider paying for a service that takes care of it for me? No. At best, it is an inconvenience — one I have to endure every once in a while, and I can live with it. Just because you can see a problem doesn’t always mean it is a problem worth solving.
Second, they feel and see that what they are thinking of is something that has never been done. Possibly. But just because it hasn’t been done ‘the exact same way’ doesn’t mean something similar hasn’t been tried. If it didn’t work then, why would it work now? Please note that I am not saying you can’t succeed where others have failed. I know better than that; the world is full of examples of people succeeding where others failed (Hello iPhone). But unless you are learning from those similar and even tangentially-related failures, you would be unable to understand what would make the customers tick. In all probability, you would end up walking down the same road, and eventually, need to box things up.
Third, customer traction can always be mapped as a function of two very primary variables — how well are you able to help the customers arrive at a connect with the problem you are trying to solve, and how intuitive, simplified and hasslefree the whole experience is for him. Take the example of whatsapp. They built their business on top of one simple ‘activity’ their target consumers were already doing every single day — sending texts to one another. They just made it better, and in doing so, did not complicate the experience. They built it around the experience customers were already accustomed to, and wherever possible, enriched it — without complicating the system in the process.
The result? Despite all the bells and whistles the apps after it came up with, Whatsapp continues to enjoy an unparalleled dominance in the messaging world — years after others have had a chance to play catch up.
Four, you need to remember that everyone has got a plan until they get punched in the face. So no matter how good a business idea you have, the second you face the customer litmus test, the best laid out plans would get flushed down the toilet. And without customers, you can’t have a business. Your customers are the only thing that matters. Actually, if we are being honest, for most online businesses — your repeat customers are the only thing that matters.
ALWAYS GO FOR TRACTION BEFORE ANYTHING ELSE
We recently got into a new business. An AI/ML solution for an industry that hasn’t gone through any noteworthy change in decades. Now, building a machine learning solution takes time, and the longer a system takes to get ready, the further away I get from real customer feedback. So what did we do? We started as a services company. A company that is offering a completely non-scalable way of doing a task we are planning to eventually automate. Why? Because it will help me ascertain whether or not demand exists for the product I would be spending months and many dollars on, it helps me understand and observe which segments of my planned product a customer is most likely to engage with (helping me with defining the product roadmap), and it will also help me gauge the price-point matrix for my future offerings (along with the value I should be offering customers against that price).
A business is not run by tech; tech is a tool that just enables it to scale exponentially.
Most entrepreneurs seem to be convinced of the fact that to run any internet-based business, they need to have a tech even on day 1. Nothing could be farther from the truth. Businesses are not run by tech, they are run by “customer invoices”. Whether you are delivering the solution via a platform, web interface, an app, or over an excel — that definitely matters, but it doesn’t matter so much that it should bring the business to a standstill.
Take the example of Zest. Zest is a simple browser add-on that will help you see a curated list of marketing-related articles every time you open up a new tab.
Now, I never asked Yam Regev how this whole thing started, but as long as they added value to the lives of their users, I doubt the early users would have hated the whole concept if the list of curated articles was being delivered via the route of plain old email, in the early days. You send emails, you see whether your users are engaging with them or not, you make some fine-tuning based on what kind of user behavior you are witnessing, and at that point, you would be having an amazing understanding of what the first product is supposed to be like.
INVESTORS ARE WARY OF INVESTING IN IDEAS
The reason behind me underscoring the importance of traction before anything else is quite simple, to be honest. Investors hate ideas! Sure, they could look all excited, commend your enthusiasm and pat you on the back, but if all you have to talk about is an idea, no matter how great you think the idea is, most of the time, the chequebook ain’t coming out.
Ideas fizzle out!
There is a phrase I use in conversations I have with some entrepreneurs I am close to. “Weed-high idea?” That’s what you call an idea when you were chilling the evening before, rolled up a joint, and as you wandered in the lands of obliviousness, thought of a ground-breaking idea. Could some of those ideas make it big? Sure. But only if you think them through. Not just the idea, but think the whole thing through — how the business would be run, what does your ideal customer look like, and how are you going to get the early traction. In my limited experience with such cases, weed-high-ideas are rarely given enough afterthought. So yeah, do me a favor and keep those weed-high-ideas to yourself; come back to me once you have put in the effort to at least think about it with some minimum level of seriousness.
So, when you are thinking of approaching an investor — Don’t! Approach your customers. Always!! Always approach your customers first. If your customers are willing to ‘invest’ in your groundbreaking idea — something that, at the end of the day, is supposed to add value to their lives — soon enough you will find an investor to do so as well.