The Startup is NOT the Product.
Many founders believe that when they start a company, that all that truly matters to be successful is the core technology behind the product. There are several factors which all contribute to being a successful startup and attracting new future investments, of which the most important is vision.
Venture Capitalists can look through hundreds of companies before we make an investment, and there are many factors of which are attractive to us which we use to indicate whether or not the company would be a profitable investment.
The startup can be divided into three main sections: product; core technology; vision and founders.
When starting a startup, you need to have strong technology to accompany your product. I look at the underlying technology and how it actually works, its uniqueness, its efficiencies, what could be improved and what could go wrong, and finally how the technology would react to the market at large.
When you are building a technology startup, there will be several changes made to your core technology before and after you start to fundraise, and it is important that your technology stands out in the market, and ensure that it is scalable, and efficient. When conducting due diligence, it is important to fully understand the product, so therefore one must analyze the underlying technology, which allows Angels and VCs to understand if a company is a good investment opportunity.
The successfulness of your company is highly dependent on the product itself. The core technology of a company is an integral factor of the product, however additional factors need to be considered, including is the core technology being utilized in the best way, does the product need to be changed to adapt to the industry at large, and is the design and concept of the product innovative, and easy to understand.
Don’t start a startup to copy an existing product, however rather to innovate and provide a new perspective to a complex product. The product of the company also needs to be easy to understand, meaning that you can easily acquire initial customers. Your product’s technology, design and innovation are the three key points which will allow you to successfully acquire users.
The user experience is something that reflects the culture of a company, and its soul. If you have a great product, you still need to ensure that the design is attractive, and A/B tested to ensure that your design is effective. When you convey information about your startup, everything is designed by the UX team and product development team, so investors should meet the product and UX team. Doing such will provide a clearer insight into the team’s ability to iterate and adapt their product based on user feedback and thoughts.
How the product differs from competitors is equally important, and can manifest in very different ways: price, offer, convenience, efficiency, reliability, integration, use-case, or acquisition channels. Having one key feature that a competitor does not have, and strong acquisition channels can allow you to distinguish yourself from other companies, and therefore appear more attractive to Angels and VCs.
Founders, Community and Vision
Having a strong product and good core technology is great, however without a vision, your company will not be able to raise money in their seed and Series rounds. Investors care about vision as it provides a definitive gateway into understanding how you intend to guide the company into the future, and how you can revolutionize your product — attracting your first million customers.
The people themselves, the founders, are the most critical factor of a company after vision. If you have successful founders, or founders which are willing to execute and build great products, and can integrate well, then your startup will be stronger as a whole. When your founders integrate well, it makes product development and fundraising significantly easier, as you understand yourselves and your future vision for the company. One major problem founders face is a disagreement internally, which is apparent to investors, which may mean you may be unable to raise another round as investors will lose confidence in your ability to execute.
The value for these products lies in the users. Most of these products are mobile first, available on all devices, and laser-focused on a particular industry: marketing, social networking, investing et cetera.
This process helps us understand why people will use your product, if the company can deliver what their business plan states, and the value of the data generated by these users. User-data can shape monetization opportunities: through lead generation, partnerships, or data integration. Running due diligence on your basic statistics is the first step we take in order to ensure that your company is a good investment.
Sustainability is key, however is very difficult to determine to to the young nature of the startup. Angels and VCs attempt to determine the early stage sustainability of a company, which is primarily dependent on if they can execute after they raise their next round, or if the company has a high chance of failing in the imminent future.
The key is that a company is not a product, and never will be. For your product to become well known and attractive in the market, it has to click within the company first. If you have strong founders, good core technology, an innovative product and a vision, then you are on the right path to developing a successful company.