What Investors Look For In A Prototype?
A pitch of your fantastic idea simply won’t cut it…
It’s a fairly long way to go from an idea to a real working product with a market fit and paying customers.
Investors won’t buy into your idea alone.
With so many ideas and startups creating new and innovative products, investors need to be able to visualize your idea first in order to get convinced that it has potential.
A physical prototype is the best way to get the idea into a real and tangible version that shows how it works and how it will deliver value to users and to the business.
Use your own means and resources to build a physical prototype. Most investors will ask you how much of your own money you’ve put into your product.
I suggest you only get investors onboard moving into the later stages of the development, especially when preparing for production due to the high investment needed for production tooling and equipment.
I would also include crowdfunding as a means of getting investment. As a matter of fact, some crowdfunding sites require a functional prototype in order to launch a campaign on their platform.
In order to get their attention, you will want to make sure that your prototype can provide insights and answers to their doubts. This is what most investors will want to get from a prototype.
Validation of the market and opportunity.
By building a prototype you will be able to validate the appeal of your idea with real customers early and therefore confirm that there is a need for it and a market interested in your future product.
Demonstration that your idea is implementable.
An early prototype might still be far from a final product but it can go a long way in demonstrating that the main concept works and that can be feasible to produce on a large scale.
Involvement with manufacturing vendors.
In the process of building a prototype, you will get in touch with potential vendors. They can provide you with an estimation of the product costs and other technical considerations that you must pay attention to.
Potential to maximize their return.
By having a prototype you can more accurately define the different aspects of your business. Investors want to get the maximum return on their investment (ROI), and having a clear picture of your business potential will help them evaluate that easier.
Commitment from you.
Creating a functional prototype is a huge indicator that you’re fully dedicated to this business opportunity. You can build on their trust by showing that you have invested time and money and have taken big risks to make it a reality.
Emotion from your idea.
Although investors might not consciously realize it, they will want to have a positive emotional reaction to your product. Nothing better than physically seeing and touching your idea to provoke that emotion on them.
Making It Happen
Now that you know what investors look for in a prototype, should you create a perfect prototype with all of the features?
I suggest starting by building something that will demonstrate that your technology or innovation actually works. But most importantly, something that demonstrates the unique value of your idea.
So, you don’t really need to spend months (or years) building the most accurate prototype of your product. Instead, start with a version with the most valuable feature that can be built quickly and with the minimum resources.
You should focus on building your product in incremental steps and add more value as you iterate with different versions. Each version will provide feedback and insights to build upon the next ones.
At later stages, you can use more mature versions of your product to show progress to earlier investors and get more investors on board if needed.
Show Your Idea’s Potential
Your first prototype might not come out perfect, and that is alright. It should be good enough to show the potential of your idea in a tangible way to users and investors.
Investors don’t like risk.
In the end, all of the above points are showing the investor that you are considering and reducing the potential risks that may arise with your idea. Thus, providing enough confidence for them to invest in an idea with limited risks.
Your first prototype could very well be the thing that turns an investor’s “maybe” into a “definitely.”
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Abilista guides innovators to develop their product ideas from concept, prototyping and all the way to manufacturing following our own step by step framework. We are already helping several entrepreneurs and startups to build their ideas by giving them access to simple and agile tools and expertise on-demand.
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