How many times have you heard that you need an MVP or traction to raise funds? I come across startups every day that face this exact problem. When asked if they’re raising funds, many say that investors told them they need some traction or an MVP before they would consider investing. So, how is it possible to raise funds without an MVP or traction?
Let me tell you what I’ve seen and how I did it.
One of my first investors, a family office from Switzerland, invested €1.8 million into one of my early startups. After we sold that company, the investor kept me in the loop and involved me in other startups he was working with. It was a venture capital (VC) firm, and they had an entire team dedicated to finding good ideas. I was surprised to learn that they wanted startups at the idea stage, without traction or an MVP. They wanted to get in early and secure the best deal. The VC had a network to recommend to founders that would help them grow their business and build an MVP.
I asked if it wasn’t safer to wait for MVPs or traction. He replied that while it’s safer, early traction still isn’t a guarantee for success. If they enter at the idea stage and work closely with founders—helping and guiding them early—the chances of success are much higher. This was just one investor’s or VC’s objective, but there are other examples.
When Steve Jobs launched the iPhone, he approached telecommunication companies. Even though Apple had never launched an iPhone before, they jumped on board straight away. Why? Because it was Steve Jobs. What was their opinion of him? How well did they know him? They knew he was a visionary and could turn ideas into business success.
So, how does this relate to what investors are telling you about not having traction or an MVP?
I believe it’s because you’re talking to your private circle. When you ask them to invest money, their minds will analyze all your shortcomings and mistakes. The more it adds up, the less they trust you with their money.
You’ll spend countless hours convincing them that your idea is feasible. They want proof that other people will pay YOU for your product.
This also applies to investors you’ve known for a long time, especially if they’ve been watching you work on the same idea. They may think you take too long to get things done, aren’t confident in your product, or don’t move forward quickly. It could be any similar reason.
So, what’s the solution?
Get to investors you don’t know!
•Find an investor list.
•Put your idea and numbers into writing.
•Contact as many investors as you can—outside your circle.
Investors are business people. Don’t sell them the product; explain how the product solves a problem and why people will pay to solve it.
The next time an investor tells you that you need traction or an MVP, take a step back. How well do you know this investor? Why are they saying that?
Millions of startups have raised money with just an idea. Some didn’t even have a pitch deck. For my first investment, I secured €150,000 with half a page of numbers—no business plan, no pitch deck. Just numbers and a vision.
Of course, this is just my experience, but the notion that you can’t raise funds without an MVP or traction simply isn’t true. Don’t stress about building a product if you need money to do it right. Sure, you can launch an MVP, but that’s a different topic. Fundraising early is possible without traction or an MVP. I know investors who do it, and I know startups that have raised money this way.
So, get out there and contact as many investors as you can—outside your circle.