Do you know when your product development is sufficient enough to raise funds?
Here are the 6 most important factors to consider regarding product development:
- Product types
The type of product you are offering plays a large role in determining whether or not your development is sufficient to raise funds. 7 of the most typical product types are: Goods, Services, Experiences, Convenience, Shopping, Specialty Goods, Industrial Goods and Consumer Goods.
- Product development lifecycle
Where you are in the product development lifecycle has a meaningful correlation to the type of capital and stage of capital you’re looking to raise, and especially the amount you’re looking to raise. It’s often best to raise capital in incremental stages so that you can continue to build value in the company before you raise too much capital.
- Capital amount and stage relationship
This may seem counterintuitive, but entrepreneurs need to be mindful of the careful balance that must be maintained from startup through growth as to the complexion of the cap table and the ongoing relationship between value creation, working capital, and dilution. Raising too much capital too early can create accelerated dilution for the founding team, because valuation may not have matured to the point where additional infusions of capital create only nominal impacts to the cap table.
- Product-market fit
This speaks to the importance of establishing and validating your product-market fit (PMF). Aside from creating a more attractive offer to investors, anchoring in the product-market fit builds confidence that you are headed in the right direction with your product offerings. We like to say that fundraising is a confidence game, so an authenticated product-market fit underpins your confidence in fundraising meetings.
- Capital strategies
A lot of additional capital can be spent reiterating a product to get it to get an optimal product-market fit, and this can increase your burn. Investors typically don’t want to fund a large-scale pivot, and would rather pay for incremental and validated shifts. It’s therefore better to conduct a series of campaigns to raise small amounts of capital when you are working to get the product-market fit right, rather than raising a lot of capital up front and having investors fund this process.
- Creating enough traction
We also like to speak about creating enough traction, but what kind of traction are we referring to, and how do we define ‘traction’ relative to product development? Important ways to gain traction include:
- Revenue traction/ Upward trajectory
- Customer/user base growth
- Repeat customers
- Engaged customers
Here are a few points to remember:
- Identify your product type and where you are in the product development life cycle
- Match your capital raising strategies and amounts to where you are in the product development lifecycle
- Raise capital incrementally until you achieve optimal product-market fit (PMF)
- Employ as many strategies as possible to gain traction
Want to get prepared to raise capital successfully?
Download our Free Fundraising Checklist Here: https://thechangeagenthub.net/fundraising-checklist
Once you receive the checklist you’ll be redirected to a video walkthrough so you can use this checklist most effectively. And you’ll also be invited to check out our 9-step fundraising preparation roadmap with detailed information called Impact Incubator Immersion. This program is the exact process all our impact clients have used to raise capital successfully.
