When pre-revenue SaaS startup founders ask me, “Do you think this is a great product idea?” my answer is always the same:

“I don’t know. And neither do you.”

My opinion of your customers’ problems and the usefulness of your software doesn’t matter much.

Your opinion is more useful, but you don’t really know yet. Far from it.

“Does it work great for your paying customers?” is the only question that matters when you are starting out.

This paradox that is not widely understood by startup founders.

The only proof that it works is paying happy customers and getting real value. Until then, you don’t know for sure.

This confuses many founders who are looking for VC funding. VCs don’t help founders by making them declare they have the magic answer too early, which is a painful trap for them.

There’s one successful Silicon Valley VC firm that doesn’t require founders to know the final answers when they are just starting out.

Dave Lambert and the team at Right Side Capital Management are very active venture capital investors, having invested in over 2,000 startups since 2012.

Right Side Capital is a “pre-VC” institutional investor that operates very differently from traditional VCs: investing when SaaS companies have little revenue. They use a submission form on their website, respond quickly, and make investment decisions in a week.

They also invest in practical SaaS founders with capital-efficient approaches who expect to sell their companies for less than $100M someday.

Dave expects SaaS founders with a few customers to make big changes as they grow. They don’t worry about it, unlike most first-check investors.

As Dave explains on the Practical Founders Podcast this week:

“More often than not, at the stages that we’re investing and someone has $4K, $8K, $20K MRR, the founders are still supremely confident and think they figured out their exact ICP and how it will grow in scale.

“These founders think, We’re just going to take your money, and it will be straight up from here. And it never goes in a straight line, or almost never does.

“We’re having conversations with founders where we’re sharing, Hey, just so you know, 90% of our companies miss their revenue targets massively in their first year. So you should assume that you are going to as well.”

In this expert episode, Dave shares practical insights for SaaS founders who don’t expect to play the big VC funding game.

Including what’s happening right now with acquisitions of SaaS companies for $25-$100M enterprise value.

It’s a great interview with a founder-friendly investor who has seen the complete startup life cycles of thousands of SaaS companies.

Check out this interview with practical VC Dave Lambert on the Practical Founders Podcast.