Pitch the future while building for now

On the eve of the 500 Startups demo day, I wanted to offer some thoughts on pitching versus product planning. In an effort to impress investors, we’ve all steered our products towards what we think is sexy or investable, versus what is most likely to work for consumers. I’ve come to believe that this is a kind of Silicon Valley disease, and we should try hard to avoid it.

The short-term/long-term dilemma
One of the hardest things for entrepreneurs is the struggle between two things:

Having a really big, really abstract goal for the future (“Connect everyone in the world!”, “Sell all the things!”)
Picking the headline on the landing page for current product you have (“Sign up for this college social network”, “Buy these books”)

It can be easy to confuse the role of the two.

Two failure cases:
If you let your big abstract goal take over day to day product development, then I’m convinced that you’ll end up building a really weird product. Consumers don’t care about your long-term strategy, they just want to scratch their itch now. They want to put you in a bucket with something else they recognize, and if they don’t get it, they’ll hit the back button in 5 seconds flat.

If you let your current product become the whole thing, then you’ll find it hard to recruit a team and find investors. They’ll think you’re just working on a toy, and especially if you don’t have breakout traction, you might get starved for money and talent.

So what’s the right balance?
I’ve come to believe that leading with the day-to-day product is definitely the way to go. Build a great product, even if it looks/sounds like a toy, and get the retention and engagement you need. Once you have that, make the big-picture story work.

That way, you’re focused on the most important thing- getting to product/market fit. That’s the hard part – making up a cool story is easy once you have some numbers.

So focus on the now, and build a great initial product for your customers. Then talk to someone who’s pitched to investors multiple times, and come up with a big, audacious story to wrap around that traction. I guarantee that’ll be easier than you think.

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http://www.thinktiv.com Jonathan Berkowitz

Nice post, certainly agree that your “build” point on the horizon is 60-90 days.

I feel like, if you achieve product / market fit, you don’t necessarily need to come up with a big audacious story to tell a capital partner. You can come up with a few key nuggets to activate the imagination of a VC / capital partner and then guide them through building your story for you … each potential partner will tell it differently. But, if you get there, you’re likely to have one heck of a winning formula.

In the end – you end up asking the capital partner to invest in his / her own story … tough to turn down or under-value.
http://twitter.com/KieranO Kieran O’Neill

Definitely agree. I think having a big, crazy, inspiring vision is important to motivate people to follow you (team, investors, etc), but you need a clear understanding of what to work on today that’s focused around engagement/retention/growth metrics.

Your product development strategy shouldn’t be to build the last stepping stone of your vision — it’s to build the first stone, then the second, then the third, until you end up achieving the big vision over the course of years.
http://www.riantstore.com/ Riant Store

Great post, agree with you. I think that your vision is superb and it will be a really good product strategy.
http://jsandlund.com/ Ven88

“In the end – you end up asking the capital partner to invest in his / her own story … tough to turn down or under-value.”

Spot on… the power of inception ; ).

Granted, it’s not without consequence. If you sell them their vision, you’ll be accountable for building it too.
http://twitter.com/jacktiantai Jack Tai

Excellent post on balancing between day-to-day product and vision! Thank you
http://www.andycru.mp/ Andrew Crump

I am personally finding a lack of understanding of this concept from VC’s. It’s strange because angels seem to be get it.
http://andrewchenblog.com Andrew Chen

Yes, in fact I wrote about this right after our lunch convo after we briefly touched on the topic ;) Thanks for the inspiration.
http://andrewchenblog.com Andrew Chen

What part do you think that investors aren’t getting?
http://www.andycru.mp/ Andrew Crump

Had two more VC talks today that got it, so maybe it’s just an individual thing.

But (without giving too much away publicly while we are raising) we have had a couple of VC meetings where we have explained the long term vison ‘Y’ (which they love) and how we now have the data that proves what needs to be done to get there – that the the first step is to do ‘X’ (which they both seemed to understand).

Then I show them product doing ‘X’ and explain how its has been architectured to become ‘Y’ but they seemed surprised at this point and questioned why it did not look like ‘Y’.

They seemed to want to see it being ‘Y’ now, but thats the whole point of raising the money… to take it to ‘Y’.

Maybe I was just not communicating well enough.
http://andrewchenblog.com Andrew Chen

Makes total sense. I wrote a short note to some friends a while back, which I’ll copy and paste here. It seems appropriate.

–
* Almost all investors are bad at investing. Don’t listen to them.

Today I had a meeting with an entrepreneur that reminded me of a simple fact: Most investors are bad, and you shouldn’t listen to them because they don’t know what they are talking about.

There’s lots of data that proves my assertion- on average, the Kauffman Foundation (among others) have shown data that venture capital as an asset class lags the S&P 500. You’re better off putting money in the stock market. Angel returns have even higher variance.

The problem is, once you’re annointed an angel investor, or an associate of a VC, all of a sudden you are treated like an expert. Entrepreneurs will go and pitch a whole bunch of investors, take the data points for why are rejected, and then try to adjust their company’s strategy to reflect that.

If you take a consensus opinion of a bunch of people who aren’t collectively breaking even on their investments, is that really going to lead to a winning strategy?

Instead, make sure you get yourself in front of the small % of people who are actually informed about your market and your product, or who actually have a track record of picking great companies. Listen to those people, even if everyone else hates your idea.
http://www.andycru.mp/ Andrew Crump

Actually that is our biggest challenge. Having unique market insights in a market that is not traditionally approached by technology gives us a have a huge opportunity (and a way to leverage ).

However, this lack of attention by VC’s and tech as a whole on our market not only creates the opportunity, it also makes it extremely hard to find anyone well informed enough about our market.

We are really lucky to have some great investors already on board and quite a few recent approaches too. But we have certainly been disappointed by the general lack of insight by some VC’s.

Being the best expert in our domain is actually quite frustrating; especially when you are judged by the wrong criteria.
http://blog.writethat.name/ Brad Patterson @ Kwaga

Itch-relief in a bucket or GONE… Love it.

“Consumers don’t care about your long-term strategy, they just want to scratch their itch now. They want to put you in a bucket with something else they recognize, and if they don’t get it, they’ll hit the back button in 5 seconds flat.”

@andrewchen