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On Raising a Seed Round: Should you raise a round before you have a product in market?

Answered by: Andy Hunt

When raising a seed, remember this: it’s always easier to sell the dream than the reality.

Having a product in market means customers, traffic, conversion rates, KPIs. Data. VCs and angels can benchmark this data across the known universe of companies and tend to make quick judgments if the data isn’t leaping off the upper right hand side of every page. Most companies, no matter how successful they are in the end, have blips, bumps and bad weeks in their early data, especially if the company is understaffed and underfunded. Unless your minimum viable product is wildly successful (and again, it rarely is), the early data it yields won’t be the evidence you are looking for. In fact, it can do far more harm than good.

So what do we look for in a seed? What is this “dream” that VCs are looking for and entrepreneurs should be selling? First, it’s about the right people. Put together an experienced, passionate and highly skilled founding team and you will have the attention of every investor you meet. Second, pick a big market that your team knows well. If you only have to own a low single-digit percentage of the market to build a multi-hundred million dollar revenue company, we’re excited. Third, have a sharp go-to-market plan. Know your target users and customers: test, survey exhaustively, use focus groups and know everything about their habits. Great products are often the result of careful research coupled with insight gleaned from a founder’s experience.

Finally, explicitly lay out your goals for your Series A. This is the province of Data. How many users? What are the most important KPIs? How much capital will you need to get there?