Minimum Viable Product · Product Development

Sell before you build. Is this a myth?

Nickolay Kolev Freelancer at Private

September 16th, 2016

I decided this was very interesting question, which came up in another discuss. 

Some of the entrepreneurs here say you should not write a single line of code, until you sell your product. This means you will have to walk up to your customers and collect money from them by selling nothing more but an idea. 

I haven't see such thing and I believe it is not possible. You can read my arguments towards the latest posts in this discussion:  http://members.founderdating.com/discuss/5925/As-an-early-stage-startup-do-you-go-after-a-single-or-multiple-target-markets

In general, my argument is that since we have such a high supply of ideas and startups, in order for a given idea to succeed, it needs to compete against a lot of other ideas. If only one of these other ideas has a product already built, that idea and startup has a huge advantage compared to the rest, which are selling only ideas. When you approach customers, they will naturally agree to pay for something already done than something still existing only on paper.

In fact, the notion of MVP is to exactly solve this problem - create something satisfying your hypothesis and put it in your customer's' hands for evaluation. Don't build the whole thing, just the core that will prove or disprove your hypothesis. This is not 'build it and they will come'. No, this is 'build your MVP, listen to customers and iterate'.

My question: Is 'sell first' a myth? Do you know of anyone who has sold to customers before MVP was built?

My experience is - MVP first, sell it and iterate.

Sam McAfee Building Popup Incubators for Corporate Innovation Programs

September 17th, 2016

Frankly, I have done or seen this about a dozen times.

We have had teams at Lean Startup Machine or Startup Weekend get checks or online payments before building anything because their idea solves a painful enough problem customers will pay in advance.

Also almost every Kickstarter campaign basically is this model already. And any preorder of a book or other media also is this model.

So yes it's possible, quite common, and you should try it. Cash is the ultimate validation metric. And the sooner you get it the more risk (time, code, cost) you have reduced.





Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

September 17th, 2016

In the case Rotary Rocket, the company took the contracts, which would be payable when the service was performed (approximately 10 years from signing), and went to Wall Street banks to borrow the money against the contracts (also known as “factoring”) because billion dollar investments are too large for VCs. The banks were concerned that 10 years is a long time, and that the customers could cancel their orders prior to successful completion of the rocket. To address this problem, the CFO purchased contract cancellation, from the only insurer capable for taking those billion dollar risks, Lloyds of London. With the contracts insured, banks were willing to loan the money - but it only happened because it was already clear that customers wanted what would be built. Now outside of billion dollar rockets with decade long development times, investors may be quite willing to accept orders or Letters of Intent as evidence of traction, and just set a higher ROI and take the risk themselves, rather than requiring cancellation insurance that the Rocket business required. Yes, Kickstarter is a store. And what you do there is “pre-sell”, which is no different from what the Rocket example did. The advantage of Kickstarter and IndieGoGo and other platforms like that is that they can help you find consumers willing to PRE-pay for idea stage products. But long before either of these, we used to seek out such customers in other ways, often through, word of mouth and event marketing. My first entrepreneurial business was a service business, graphic design and printing. Since I had not been doing graphic design and printing prior to getting that contract is exactly an example of selling something before you have it! Now, I will admit that it is far easier to sell a finished product than to ask someone to trust you, that you will deliver. However that doesn’t mean that it is impossible. In my case, I focussed on my customer’s problems with their current supplier, I offered them the chance to get each poster they wanted with less effort on their part, with a better appearance, at a slightly lower cost, and I also offered to handle rush orders within 48 hours (which the existing supplier could not accept) - at a higher cost. After the first month, I was getting all of their business, and more than half of it was the more profitable rush orders. Since that time I have developed other SaaS and HWaaS services for other start-ups, and I regularly get a first customer (often one who becomes a first investor) to advise us during development, and because they become proof of traction that investors can actually talk to. I will agree that Service startups are not a good fit for equity crowd funding platforms like crowdfunder who are looking for proof of traction. But frankly those sites have not been particularly good for product start-ups without traction either. It isn’t the form that matters, it is that the kind of investors attracted to these platforms are looking for evidence of ROI that is independent of their own interest in what the product or service is. The way to get pre-paid customers is to go directly to the people who have an existing problem, the people you think will be your customers. 90% of them will decide the problem isn’t that critical and that they can wait until a finished product is out there and vetted by other people. But the remaining customer prospects are the ones who will be first adopters precisely because their back is up against the wall in some way - and most of these are so frustrated by the status quo that they will eagerly put the time and effort in to accelerate getting the solution they need. And among the most motivated are those who will put their money where their mouth is - either through pre-payment like Kickstarter backers, or those “strategic” partner angels who invest because they will also personally benefit. Of course, if you have the personal funds to create an MVP, if you find the money raising process hard, you might well go ahead and create an MVP instead of seeking customers. That’s especially reasonable if you can afford to try and fail a number of times before finding product-market fit. Because having a customer at the start de-risks projects for me, and since I seem to be able to do it, I prefer it rather than risking more time and money to discover a product-market fit. I prefer to start with that. But if you find it hard you have to go the way that works for you. It might be higher risk, but you may have no choice than going with your strengths. For people who find it hard to sell their ideas to customers, I totally understand why they would not want to do spend time pre-selling. I can understand why they would believe that if they can just create something, and then show it (“if you build it, they will come”) sounds seductively easier, and maybe for that person even necessary. I find that the people who are most successful with pre-selling usually talk about their future products in a very different way from those people who have to build their MVP before they can find customers to back them. Here is the difference I have noticed: The Pre-sellers actually are not pre-selling a fixed product or service - they are selling an opportunity to someone experiencing a problem (the prospective customer) to have a collaborator (the entrepreneur) who will work together with them to jointly solve the problem. In short, they are selling a development process that will result in a product or service, and not the end result itself. This kind of entrepreneur is very flexible about what the product or service is and acts as a co-equal with the customer on product definition, and that approach appeals to smart people who have problems that are very pressing - and which they are frustrated that they currently are unable to solve on their own. This customer sees that their active involvement is actually making a big difference in assuring that the final result will be PERFECT for their needs, and they will get it far sooner by actively collaborating, rather than waiting for the right product to come on market. At the risk of perpetuating a stereotype, the people who are most likely to communicate with customers in this way usually have a long successful track record of “business development” positions. These people have their ego wrapped in the ability to create through collaboration and partnership. The Sellers typically have a fixed solution in their mind, and they don’t want to collaborate with customers who might want the product or service to go in a different direction. Since there is little personal benefit to the customer when all they have to do is make a single yes/no decision, rather than a collaborative process that involves them, Sellers usually find that selling ideas before they are built doesn’t create much enthusiasm, as the customer figures they can just wait and make the purchase decision later. Again, at a risk of stereotyping, I will say that it is often the most successful technical performers who are most likely to have the Seller style. These people have their ego wrapped up in finding and delivering solutions that no one else can see. I have seen some start-ups who begin with only founders with Seller approaches be unable to get customer-investors, so they eventually do need to make an MVP without one. However, occasionally a new founder is added to the team, one who has those collaborative qualities, and suddenly the company finds it easier to get customer-investors. Anyway, I sense that Nickolay’s comments are coming from “pre-selling strategy is not working for me” and therefore questioning whether it is possible. My answers are coming from “there are examples that show it is possible for some people some of the time”. But that doesn’t necessarily mean it is possible for Nickolay, or anyone else who has more of the Seller, rather than Pre-Seller, personality. There is no right way, only what’s right for you. Only you know your strengths, and trying to do it someone else’s way may not work. But you don’t need to prove that no one else can do something just to be able to say it isn’t right for you.

Rob G

September 18th, 2016

The fact that so many startups (i'm talking about technology companies building software-based products/SaaS) do not first get customer commitments is somewhat puzzling, but i suspect primarily due to habit.  I suspect that the primary issue is that we tend to stick with what we know and if the founders don't know sales then this approach of selling first is just not even a consideration.  If what you know is software development the easy approach is to start building "so we have something to show".   It's hard to identify ideal prospects and nail down meetings and build presentations and go pitch and it's hard to hear "no" a lot.  I think most team just avoid it.  It's baffling to me.  Today I wouldn't consider putting my money into an idea if i didn't first have commitment from  customers - some kind of commitment.  I occasionally work with an incubator that typically has around 30 startups at any given time.  i've seen 100+ startups come and go through this incubator.  most are 1-3 founders. I would estimate that perhaps 3 teams out of 120 or so have had anyone on the founding team that has any sales experience.   When i ask what sort of commitments they have from customers the universal answer i get is "we haven't finished our MVP yet...."  They typically do some sort of market surveys, but they tend to focus on the 'yes' answers and ignore the "no's".   The pattern continues when, after they have the MVP built, they then ask "so how do we find our customers" or "how do we ramp up sales" or "where do i find a sales guy who can sell our product" or "why can't we find a sales person who can sell our product for commission only..." or "our conversion rate sucks, where do we find customers"....   We then walk through a short exercise to see if they can afford to hire a sales person (commission or otherwise) and the numbers simply don't add up.  I then ask how many customer orders/contracts they got prior to development and i get a blank stare. And the pattern continues. Not all models lend themselves to getting customer commitment up front. My advise for early stage teams is to first find a cofounder with applicable sales experience before you start building the MVP. 

Rob G

September 19th, 2016

+1 for what Sam M said about teams whining about customer acquisition problems post MVP.   In my experience the vast majority of the time the MVP that is produced (often over many man-months or years) is a solution looking for a problem. 
 
@ Ema, i try to avoid business models that require direct to consumer sales so i can't speak from direct personal experience, but the process should not be much different than b2b.  You still need to identify your ideal prospect, go talk to them, understand their pain, present a solution to that pain (not a MVP or prototype, but ketches, images, screen mockups, etc.), listen to objections and suggestions, adjust, and repeat.  Part of the process of deciding if your idea is viable or not is the process of developing the ideal prospect profile, understanding how/where to find them, how to reach them, how long that will take and how much that will cost. If it's too hard or too expensive to reach them it doesn't matter how good your MVP is.  You need to figure out your selling model long before you start cutting code.  When you are identifying pain it needs to be real pain and you need to ask enough questions to know what it is worth to the user to relieve the pain.  If you can't make enough money solving the pain why bother?  I realize that not all consumer decisions are made strictly to relieve pain, which is why i don't like b2c business models in general, but solving pain is the easiest to sell.  If you are trying to sell a product based entirely or mostly on how it looks or feels then yes early mockups make sense but that assumes you can build a mockup in just a few days not months or years.  For many startups who have built a MVP, much of the time it turns out that there is no real pain and/or the solution doesn't really relieve the pain efficiently (the solution takes too much time/effort/cost).  Understanding this does not require a MVP or prototype.  Most of the time in these early discussions I don't want a prototype/MVP.  Even if i had one i would not show it.   i don't want to show anything until i clearly understand their pain and i've asked enough questions to know they are a good fit for what i think is the solution i plan to build or if my solution falls short.  Not until i thoroughly understand every objection, competition, budget, etc.  A product demo is the last step and only a proof step that my solution does what i said it would do and i usually don't even need that.   I don't want to show a MVP until i KNOW I have nailed it and i don't need a MVP to know that.  I hope by now we have addressed the original question - 'sell before build' is not a myth, it is good business practice. 

Gary Jurman Screen Printing Industry (30 yrs)

September 17th, 2016

I read an article about pretotyping where the author talked about ways to create "almost" products to test for marketing. Basically, a pretotype is a pre-protoype where you can demo the product. It looks real, but isn't. You test the market with that to see if there is any traction.

Matthew Mellor CEO of Strenuus

September 17th, 2016

I think it's very difficult to do as a startup. If you're a more established company with a track record, you may have some customers willing to take a chance on an idea, particularly if it's incremental to work you've already done.

But the I think the way to answer this question is to turn it around--if you were the buyer, wouldn't you want to "see the goods?"

Rob G

September 17th, 2016

It is not a myth. I've done this myself with 3 out of 4 startups.  Not only is it possible it is preferable.   If you solve a big enough pain and you can identify those who have this pain acutely then it is not that hard to get a commitment from them.  You have to ask.  If they say 'no' find out why.  Objections are fine - you can learn from objections.  You don't learn anything by not asking.  If you need to tweak your solution then this is a much better time than after you have spent months or years and scarce cash building.  Commitment may be in the form of $$ or a contract or commitment of resources.  If you can't get commitment from a significant % of your ideal prospects then perhaps it's time to pivot. 

Ema Chuku Product Developer. Founder @ Ridit

September 17th, 2016

@Sam one would argue that on projects on Kickstarter atleast majority of them have actual products made. You may call them prototypes but they are actual products.

It's true you can sell vision before products but that is for a certain type of product and very few occasions. Very few occasions. 8 out of 10 customers are likely not going to pay for a visionary product. It is simple.

It amazes me how people complain about "time, money, etc" in creating MVP, and still hope to be asking for customers money. It's one thing to research for open-validation but if you are going to be asking for people's money, atleast devote time to produce some sort of a prototype..

Between, let's not confuse "Investors money" with actual "Customers money".


Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

September 17th, 2016

Yes, I do know someone who has sold first and then built the product. I have done that myself. I highly recommend it to my other clients. But you have asked about whether we know others, and perhaps that distance is better. I’ll tell you a story relayed to me by the former CFO of Rotary Rocket, one of the predecessor Space X. The first step in getting that company funded was to speak to the prospective customers. There were 7 satellite companies who needed to put their satellites into low earth orbit. He went down and talked to them all. He got all 7 to sign contracts to purchase space on the rockets when the rocket was available, at a specified price. Of course, when you know a rocket will take ten years to develop, and cost billions, you want to be pretty sure that there will really be customers, and you want to involve those customers during the development process. What Rotary Rocket did was still building an MVP, just one that already had a builtin customer base. It is also why I try to get a customer as a partner before I build my MVPs. Some customers, some of those who will be most valuable to you are the ones who secretly want to be able to have someone to tell what they really want, but no one is giving them. That customer may provide excellent advice to help you know what they (and other prospective customer like them) need. And they will know other customers like them, and introduce you, simplifying your approach to finding next customers. They may even be a first investor. And when you do complete the MVP, you will have the first traction and a step towards proof of product-market fit.

Sam McAfee Building Popup Incubators for Corporate Innovation Programs

September 18th, 2016

OK, whatever... fuck Kickstarter. :) Who cares?! Bad example maybe.

My point is that I have personally run a process, and coached other teams, to pre-sell software apps or systems that don't exist yet. I have done it at the enterprise level twice with rather large systems, and many times at the consumer level in short "idea to MVP" sprints with clients at Neo. It's just table stakes for teams that run agile and lean. This is Lean Startup basics, people.

It's totally up to you if you want to build your MVP first before validating with cash that anyone actually wants it, but that's not what I would do.

I talk to founders all day who have spent 3 to 6 months building some app, and then are whining about their customer acquisition problems. Hell, I have addressed that on this forum at least a few times. It's because they've failed to validate they have a real customer segment with a real problem, and that they have the right solution for that problem. You can validate that in a lot of ways before writing a line of code, and pre-selling is just the most clear and explicit way.

The question is "Sell before you build, is it a myth?" We've answered the question: No, it's not a myth.