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Three reasons: 1) I think there's actually a significant difference between "we think customers will really want what we're building" and "a few companies like

Three reasons: 1) I think there's actually a significant difference between "we think customers will really want what we're building" and "a few companies like our product enough to pay $20k/year for it." (If you a found a few customers like that, you can usually find many more.) 2) The practical reason is that often (but not always), when my partners and I see an interesting pre-launch or pre-traction company, we think "this looks promising, we just wish there was a little bit of traction to validate that this is solving a real problem in a meaningful way." So waiting for a little bit of traction before engaging saves time for us and for founders. 3) Investors can get a lot of insight from talking with one or two live customers before making a decision.

danieltillett 10y ago
Thanks for the reply. 1 and 3 should be solvable by talking to potential customers in the market, while I guess 2 is a pragmatic choice based on time. I do a bit of angel investing and I have found far more value talking to non-customers in the target market than to actual customers. My experience is many startups end up creating a product too focused on the specific needs of their current customers at the expense of future customers. I prefer to invest in a startup that has built a product that I think has general appeal in the market and zero customers than one that has a few customers and a product that has lost some of its general appeal. These startups are also way cheaper which covers a lot of mistakes by me. The only downside is you have to vet more companies, but this approach has got me access to some rather good startups that I would not have had a chance once they had traction.
- lpolovets 10y ago
  I agree with you: there's a lot of value in talking to non-customers, too. Sometimes that's easy because we know a lot of potential customers for a startup, and sometimes it's hard because a startup is operating in a fairly obscure field.
  - danieltillett 10y ago
    If you have trouble finding potential customers then the startup will too. I have asked the startup to help me find these people and if they can't help me then this is a massive warning sign for me.

danieltillett 10y ago

Thanks for the reply. 1 and 3 should be solvable by talking to potential customers in the market, while I guess 2 is a pragmatic choice based on time. I do a bit of angel investing and I have found far more value talking to non-customers in the target market than to actual customers. My experience is many startups end up creating a product too focused on the specific needs of their current customers at the expense of future customers. I prefer to invest in a startup that has built a product that I think has general appeal in the market and zero customers than one that has a few customers and a product that has lost some of its general appeal. These startups are also way cheaper which covers a lot of mistakes by me. The only downside is you have to vet more companies, but this approach has got me access to some rather good startups that I would not have had a chance once they had traction.

lpolovets 10y ago
I agree with you: there's a lot of value in talking to non-customers, too. Sometimes that's easy because we know a lot of potential customers for a startup, and sometimes it's hard because a startup is operating in a fairly obscure field.
- danieltillett 10y ago
  If you have trouble finding potential customers then the startup will too. I have asked the startup to help me find these people and if they can't help me then this is a massive warning sign for me.