Why MVP or Traction Is NOT Important for Fundraising
How many times have you heard that you need an MVP or traction to raise funds? I come across startups every day who have exactly that problem. When you ask them if they are raising funds yet, they say that investors told them that they need some traction or an MVP before they will consider investing. Then how is it possible to raise funds without having an MVP or traction?
Let me tell you what I have seen and how I did it.
One of my first investors, a family office from Switzerland, invested 1.8 million in one of my first startups. After we sold that, he still kept me in the office and involved me in other startups that he was working with. It was a venture capital (VC), and they had an entire team dedicated to hunting good ideas. I was very surprised to see that they wanted startups that were at an idea stage without traction or an MVP or even just an idea. They wanted to get in early to get the best deal. The VC had a network they would recommend to the founders, that would help them grow their business and build an MVP.
I asked him if it wasn’t safer to look for MVPs or something with traction. He replied that, while it’s safer, early traction is still no guarantee for success. If they can enter at an idea stage and work next to the founders — helping and guiding them early on — the chances of success are much higher. Now, this is just one investor or VCs objective; then there are other examples.
When Steve Jobs launched the iPhone, he went to telecommunication companies. Even though at that time, Apple has never launched an iPhone before, they jumped on board straight away. Simply because it was Steve Jobs. What opinion did they have about him? How well did they know him? They knew that he was a visionary and was able to turn it into business success.
How does this relate to what investors are telling you about not having traction or an MVP?
I think it is because you are talking to your private circle. When you talk to them about investing money, their mind will analyze all the shortcomings you have, all the mistakes you have made, and the more it adds up, the less they will trust you with their money.
You will spend countless hours convincing them that your idea is feasible. They want proof that other people will pay YOU for your product.
This also applies to investors, with whom you have been in touch for a long time, about the same idea. They are thinking that you take too long to get things done, or that you are not sure about your product, you don’t move forward fast, … It could be any similar reason.
So, what is the solution to this?
Get to investors you don’t know!
- Get hold of an investor list.
- Put your idea and numbers into writing.
- Contact as many investors as you can — outside your circle.
Investors are business people. Don’t sell them the product; explain how the product is solving a problem, and why people will pay to have that problem solved.
NB! What they will do is look you up on Google. I will dedicate a separate article on how to create your presence on Google. But the basics are to have your Social Media ready. Something about you should show up before you start approaching investors.
The next time an investor tells you that you need an MVP or traction, take a step back; how do you know this investor? Why are they saying it?
Millions of startups have raised money with an idea alone. Some didn’t even have a pitch deck. For my first investment, I received €150,000, all I had was half an A4 sheet. I wrote down how much investment I needed; when I needed it; what is it for; how it will be spent, and when the investor can expect their return. Based on these five-six lines, and only numbers, I had a meeting with investors. I never prepared a pitch deck, a business plan, nothing. And I still got €150,000.
Of course, this is only my experience, but it is simply not true that you cannot raise funds without an MVP or traction. Don’t suffer in trying to build a product, when you need money now to build a better product. Yes, you can launch an MVP, and that’s an entirely different topic, but fundraising early on is completely possible without any traction, without an MVP; so many startups do it. I know investors who invest in them, and I know startups who have raised money like that.
So get out there, and contact as many investors as you can — outside your circle.
