How Most Professional Saas Investors Don’T Invest Before Some Revenues And Traction

I talk to dozens of entrepreneurs every month who are building a new software product to solve a problem they care about.

But I have to take a deep breath when I hear some of them say this:

“We are almost done with our MVP. So I’m going to start looking for funding to begin marketing it and to finish the real product.”

Sigh.

I don’t blame them for thinking this.

Or even for needing more investment. I get it.

There is a continuous stream of new founders who think this is “how it’s done.”

“Don’t you just find a problem, start on your idea, get funding, then grow it up?”

Isn’t that how this game works?

In fact, it ALMOST NEVER happens this way. With funding so early, or ever. Especially this year.

So let me be clear. As clear as I am with the founders I talk to every day.

I DON’T KNOW ANY SERIOUS ANGEL OR SEED INVESTORs WHO INVEST IN PRE-PRODUCT OR PRE-REVENUE STARTUPS.

I know hundreds and hundreds of active early-stage investors.

They are waiting for you to build something useful, sell it to someone, get a bunch of happy customers, and prove there is a hope of a business there.

There are rare exceptions when experienced investors invest in a savvy founder before real product traction and impressive revenue growth.

But 90%+ of product ideas without revenue traction of $10K or $20K MRR don’t make it.

Experienced investors know this. New founders apparently don’t.

So it’s a waste of time for founders to play the funding game with endless pitch decks, networking, pitch events, and legal docs BEFORE you have some customer and revenue proof.

There are INEXPERIENCED INVESTORS that you know personally who will donate to help you get to product and revenue and positive traction. Friends, family, and wealthy people who made money in your space.

And even with traction, outside funding is not actually the best way to grow and succeed in the scale-up game for MOST founders.

  • Who is telling startup founders to get funding so early?
  • Who is telling founders that funding is the answer?
  • Who is telling them that everyone’s doing it?

The Funding-Industrial Complex is telling them. To sell funding to founders.

Nobody is telling these founders to STOP thinking that funding is the answer, it’s just fuel. And that it’s not the only way to play the SaaS growth game.

Outside funding isn’t bad. I’m an active investor myself. I played the VC-funded startup-to-scale game for 30 years.

But raising outside funding, especially BIG outside VC funding, is just a very specific and high-risk game for a SMALL subset of startups who want to bet it all.

Even then, early funding mostly doesn’t work. It usually makes things harder and doesn’t end well for founders.

ALL VCs and early-stage investors know this.

This is why they wait on the other side of “revenue traction” and “product-market fit” to invest in just a few of the hundreds of serious startups they talk to.

#practicalfounders

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