Angel investing · Venture capital

Pitching to Angles and VCs before or after a viable prototype?

Justen Finch Owner, Product Data Reporting at Cleu Inc.

March 28th, 2015

I developed a website with a great concept that never got off the ground because I was funding it 100% and wasn't able to give it the money needed to succeed.  I tried using open source to cut down on the expense and it ended up costing me much more in the long run and had no money left over for marketing.  I took it down last October since it was not working as well as it should.

I would like to pitch it to Angels and VCs to help give it a chance for success.  It is a great concept that resonates well with people and my business plan has been very solid.

At this point, I don't have a working prototype since it took so much money to build this site and it was not something that could have been used successfully.  Again, I bootstrapped this completely.

My question:  Do I need a viable prototype or working product to be taken seriously by investors or is it possible to secure funding based on concept and business plan?
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Steve Simitzis Founder and CEO at Treat

March 29th, 2015

For me, the only relevant unknown in your post is:

"it was not working as well as it should"

Why wasn't it working as well as it should? If you can answer this in detail, then that will inform your next step. If you saw early signs of product market fit but the product didn't work for very correctable technology reasons, then investors may be interested. Did you ever put your product in front of real customers? If so, what did you learn from that? What metrics do you have that show that real customers want to pay money for your concept?

Also I agree entirely with Joe Monastiero's LinkedIn post. "Fund me because you like my idea and I have a good track record" isn't even worth the price of the coffee you're meeting over. Metrics from a product you've bootstrapped are everything. 

Michael Barnathan

March 29th, 2015

My fundamental outlook in the early stage is "you're on your own, build it and they [the investors] will come". Same reason I find the people who are overly protective of their early stage ideas funny. Investors typically want to scale businesses rather than seed them - it's less risky.

So my response would be, after self-examination, to find a cofounder and keep bootstrapping - if risk-averse investors want to come in later once you have a successful product and lots of traction (as most do these days), make sure they pay for it in the form of a higher premarket and poorer terms, of course.

I guess the question in everyone's mind is why it failed during the first bootstrap. Was it something fundamental to the idea? Missing a skill on the team? Not enough market research? Examine in brutally honest light what went wrong and fix it before going forward, so history doesn't repeat itself. How would it have happened in a successful business, and what broke down where to prevent that?

Lane Campbell Lifelong Entrepreneur

March 28th, 2015

Investors who believe in you and your team won't care if you don't have a prototype.  However, you've admitted that you couldn't execute even though you have gone and seed funded it yourself.  With that out there I think your only option is to find a cofounder who can build it.  

Alan Matthews Entrepreneur

March 28th, 2015

You should test the concept before the technology. That's free.

John Seiffer Business Advisor to growing companies

March 29th, 2015

Justen, the thing that's missing from your story is any news from the customers. Did people buy what you were selling? Did they express interest? I think that's what Alan Matthews meant when he said test the concept. It means see if people want to pay for what you've got in mind. 

Customer interest will make your project interesting to investors. OR as Joe Monastiero said, it will give you the cash to continue bootstrapping. 

Even now I'm sure you still have screen shots and explanations of how it works - you can use those to learn what customers want to pay for. That data will help you decide how to go forward. Dropbox famously did this kind of learning with a 2 minute video. That was their MVP. 

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

March 29th, 2015

Hard to be specific given the details but here are some guidlines we use when looking at websites

Revenue and client numbers if a ecommerce type of site-- if your interest is VC backing understand there is little interest in sites that could be nice 10 or 20M business'.  The financial model usually does not work.  and I would say that today (as opposed to 5 years ago ) if you need more than a few hundred K to get a good site off the ground something is askew...  and for 250-500K your answer should be angels not VCs. The site has to be the front end for a business.  (think UBER).   The site is probably not the business.

If its an aggregator site... meaning we build a user base and try to leverage that base as marketing or advertising or similar models...   don't show up unless you have 500K or 1M user base.

along with the basics..

- management team and their mindset to pivot and move on if required..  breadth... its alot more than just a good web developer and good idea guy...   in particular for something (like web) that has to scale..

- web vs mobile...   most creative things seem to be mobile based not web based... especially given the phablet phenomena

- uniqueness and ability to sustain differentiation...  alot more than no one else is doing this...


Adryenn Ashley

March 29th, 2015

I would bring on a co-founder with the skills/cash/connections to help get a prototype done. Much better to bring on someone with skin in the game than take money with a pre-prototype valuation. OR if you can find someone to give you a SAFE Note for the money and you can pay them back. It's still a risk, but if you collateralize it, much easier to do depending on how much you want. [image: photo] *Adryenn Ashley* Exec Producer/Founder, Crowded Reality Inc. p:415-420-5627 | e:adryenn@crowdedreality.com | w:http://crowdedreality.com

Eric Wold

March 28th, 2015

VCs = no chance
Anges = average chance if they like you (average means maybe 2-5% chance, numbers game, talk to a lot of angels)
Apply to http://www.science-inc.com/.  It is a new kind of "full stack" incubator.  Mike Jones is an amazing guy.  His group will build everything for you and invest that way.
I'm trying to build a group just like it in Utah, but will only take local startups in my group.

Joe Monastiero CEO, Founder nFlate

March 28th, 2015

Here's a post I wrote on this subject earlier in the year - https://www.linkedin.com/pulse/20141203165040-1101775-the-paper-napkin-is-dead.

Sorry, but bootstrapping is the new angel round.

Bob Graham Engineering and Software

March 28th, 2015

Give it a try and tell us how it goes! Maybe you'll get lucky