Questions

Seems like there are 2 ways to go about start ups: 1st when you have an idea & MVP you go all out for financing, contact as many sources as possible.

The other more traditional way is to build the product, start selling it in the market and slowly grow. When you gain traction then financers come to you. Am I correct in my thinking? Any one way more advisable/prevalent?

3answers

More or less correct that in raising seed, that most companies that successfully raise, fall into two camps: either a conceptual raise (with little to no evidence) or a traction-raise. The conceptual raise is almost always easier but puts most emphasis on the founder(s) which means that without a lot of prior success or good predictors for future success, a conceptual raise is simply not possible for many founders.

A traction raise can be really tough because the "metrics that matter" are so subjective to each investor and what's already been achieved gets discounted almost to zero and the analysis is on the question of "how much bigger can this be?" which leaves most inexperienced founders unable to articulate a credible vision of how it can become a billion-dollar business (at the very least in enterprise value)

What to raise, when to raise, and how to raise are all questions I have helped a lot of Clarity members answer. I encourage you to take a look at the reviews other Clarity members have left about their interactions with me on this subject. If you're serious about understanding your options, I'd be happy to help you in a call.


Answered 7 years ago

In my experience, the first strategy is successful when you already have street cred. Have built a couple of start-ups before and have a very strong network and relationships or you have been working for a tech company for many years in a group that made it very successful decides to leave and start something that solves a problem that your employer wasn;t willing to solve.

The second strategy is better for people with no street cred and limited networks. As you need some proof of traction before anybody will look at you. Even then, financiers may or may not come find you, you may still have to go look for them.


Answered 6 years ago

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