Fastbreak Ventures is a pre-seed stage fund so we meet a lot of very early stage businesses, too often, we meet with founders looking to raise money who have an interesting concept, a rough prototype, a few early customers, but haven’t asked themselves some of the most important questions about how they’re going to attract customers and scale the business.
Below are a few questions Startup founders need to ask themselves:
Is your solution a feature or a product?
Often founders think their solution is a product when in fact it’s a feature—a distinction that’s imperative to the sales process.
A product is a standalone item, tool, or service that has innate value for a customer or client. Products are sellable and are less reliant on other products or services for its overall success. Prominent examples include Shopify and Salesforce and our portfolio company wound tracking app SwiftMedical.
Alternatively, a feature is a function of a product that alters it and adds value. Customers wouldn’t buy a feature on its own, as they’d need the primary product or service for it to have value. Founders should know if there are existing products in the market that should and are likely to add your feature. A prominent example is our portfolio company Shoelace.
Both can be viable business models, but features bring the risk of relying on another company (often via an API) to function. Founders should be asking themselves if it is wise or necessary to rely on one partner company, or if their product can be built as a standalone solution to work with many partners.
What problem are you trying to solve?
Have you built an interesting solution that is looking for a problem or have you built your solution to address a specific pain point in business that will save customers money or help them generate more revenue?
There’s a difference between something companies must have because it will directly assist them in generating more revenue, ( such as our sales enablement portfolio company LevleJump ) which is typically a faster sale, versus a solution that saves cost—still a plus but often harder to sell.
In either case, it’s important to focus on delivering and capturing as much data as you can in order to continually prove your worth and figure out how to price your solution. (We’ll save the pricing discussion for another time.)
Who’s your customer?
Your solution will dictate how you identify your customers. Founders of product-based solutions should be conscious of finding leads and customers, whereas founders of feature-based solutions need only be plugged into one business or community.
Within your target client companies, you also need to identify who is paying for your solution; some departmental budgets have more flexibility than others. Marketing budgets are typically substantial and tend to be amenable to try new strategies to reach their goals, whereas IT and finance are typically more stringent. This isn’t to say you shouldn’t pursue products or features in these areas, but it’s important to know the realities of who you are selling your solution to.
How do you track ROI for customers?
Capturing as much data as possible is one of the greatest tools to scaling and overall success. However, data isn’t always easily accessible, especially in the early stages of your startup.
If data is accessible, use it to establish how effective your solution is. If it’s not, think about how to incentivize early customers to share data with you. By having the ability to compile data from clients, you can learn a tremendous amount about your solution and potentially adjust your pricing to increase earnings.