3 Must-Haves to Raising Money Without a Product

Sand Hill Road is the birth place of Silicon Valley, and
arguably the most powerful road on the planet. Even
though the world of venture capital has slowly started to
decentralize, it is still home to some of the largest
venture funds on the planet. And there I was, pitching to
a team of high profile investors, without a product,
yet again.
I'm always on Quora and the question, “Is it possible to
raise funding before building the product/app?” was
asked. My short answer is “yes, it's possible.” I know it's
possible because I have first hand experience of
successful raises without a product.
Related: 4 Steps to Beating the Odds and Winning
Startup Capital
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Some of my firsthand experience is as follows: I was
previously involved in a $2.2 million raise that did not
have a product upon funding (mind you, it was an actual
consumer product, not a digital product, which is what I
am actually referring to now). I've personally done it a
handful of times, with my largest raise being a six-figure
investment with no product. Plus, I am confident we will
raise $650,000 for this business, without a product,
based solely on our demo.
From my successful experiences, here are the three
must haves:
1. Team
You ever hear the saying, “we don't bet on the horse, we
bet on the jockey”? It's a mantra for most sophisticated
investors around the world. When working for an angel
investment team in my younger years, we lived by it. In
fact, besides our industry focus and size of deal, that
was our main investment criteria.
For some investors, team is the single most important
factor they consider when placing their capital. Do not
confuse that with previous success as there are plenty
of inexperienced entrepreneurs that get funded. However,
you need to be able to articulate why you are the right
team for this opportunity to accomplish your vision.
Assembling the right team for your mission will be a
testament of your ability to lead, influence and enroll
people into your vision. Don't underestimate the power
of the right team.
2. Demo
If you don't yet have a product, as in our case (we are
still in development), you best have some sort of demo.
Long gone are the days where you could roll up to an
investor meeting with a pitch deck and a dream (well,
anything is possible, but being an entrepreneur is hard
enough).
Related: 8 Questions That Will Help Set the Right
Expectations With Investors
Figure out what that means for your business. For us,
we mocked up some key pages of our platform that
helps portray the vision, and inputted them into the
Invision app, which takes Photoshop files and makes
them clickable via hot buttons that makes it almost feel
like you're clicking through the pages of a website.
Without a product, some sort of demo is mandatory
because it helps portray your vision, and shows anyone
thinking about investing that you're serious enough to
get started.
3. Validation
You need to be able to validate the market opportunity. If
you're developing a mobile app, create a landing page
and run Facebook ads to build an interested list of
people who would sign up for your app. This shows a
demand in the marketplace.
Referring back to the importance of team, sometimes an
effective validation technique is to get someone of
industry importance to join your team in some role. This
can create the subtle notion that, “if this industry expert
is going to be involved (and they obviously know much
more about this space than I do), then this is probably
worth pursuing." Plus, more often than not, that industry
expert can navigate some of the nuisances and pitfalls
of the space.
In our case, we have a number of validation techniques,
with one point being twofold. We've struck a big deal
with a major media company that is going to be our first
customer. There's double validation because it's a well-
known company and they're going to be a customer.
Validation at this point, for those without a product, is
another critical factor that will contribute to your funding
success.
Boom. This should be easy enough, right? Don't be
discouraged if it takes longer than you expect. Capital
raises are tough and always more time consuming than
anyone ever hopes.
In summary, yes, it's possible to raise funds without a
product, but it's also possible to swim the Atlantic,
paint an exact replica of the Mona Lisa and win the
Crossfit Games four years in a row. Good luck, and
happy funding.