Ask HN: How extensive should we make a product demo for investors? | Hacker News Reader

Ask HN: How extensive should we make a product demo for investors?

4 pointsBadassFractal5 comments

This is something my partners and I have been discussing recently regarding our product's demo. We want to pitch the idea to investors, but we also want to back it up with something to show that's not just powerpoint slides.

As someone coming from an agile background, my thought was to very roughly prototype the basic feature of the product that would be one of its selling points and show it in action as a "proof of concept" of that being doable. My partners though believe that we should do much less and show just the rough UI of the product without it actually being able to perform any functionality.

I'd like to understand what's usually expected out of teams at this seed stage, because I'm personally concerned about not selling vapor, but perhaps my engineering background is holding me back on this one. Is there some rule of thumb for this? Does it strongly depend on the kind of service/product you're trying to sell? Are there perhaps resources/articles out there that you guys used when you were deciding how far to go with a prototype?

Thanks!

First, if you are going to embrace the 'agile'/lean startup approach, you need to cozy up the idea of vaporware. Sell it first, then build it. Setting the proper expectations is critical. But this is the single best approach for a bootstrapped company. Having one sale of one dollar is a huge milestone and makes your position way stronger when talking to investors. Here's a good video on the subject: http://vimeo.com/15894299

Second, do yourself and your potential investors a huge favor. Build whatever prototype you think you need for the investor presentation. Then go and give the same demo to 20 potential users first. Then refine your demo and present it to investors. The insight you'll receive from the customer demo is invaluable! Here's another good video on this: http://vimeo.com/16200157

Third (and most controversial), don't waste your time with investors until you have a built product and paying customers. Seriously. Finding investors takes A LOT of time. And you'll have to give away your company to get investment at this stage. The general rule is to wait as long as possible before taking investment because (theoretically) your company will improve its position with time and the cost of the investment capital will go down. Find some friends and family money (< $50k). Build a product. Sell the product to 10 people. Then entertain the investor route. If you can build a product and sell a product with <$50 investment, you will be in an exponentially better place than you are right now.

Good luck and keep us posted.

Those are both very interesting links, thanks for sharing, I feel like I learned a lot from them. In addition I liked the following link I stumbled upon as it confirmed in large part my suspicions: http://www.artificialignorance.net/blog/startup/the-startup-...

I'm not familiar with how a lean startup is supposed to handle the alpha stage and so I'll need to read up on that.

Regarding bootstrapping, I think our issue was to try to get some funding asap so we can start working on the project full time. We have very few engineering resources as the best hackers are already hard at work at their full time jobs and with funding we could be able to dedicate all of our attention to the project.

My opinion has always been that you need to prove that whatever you're doing is doable, confirm the hypothesis that someone would want to use it, before you go to people and ask for money. We might not have the luxury to be able to wait that long, but perhaps there's simply no other option and therefore it might take years before we can leave our full times :)

Something else I haven't found so far were examples of alpha demos that these now famous startups did back in the day. I've seen collections of demos for TechCrunch and other venues, where for example DropBox already had thousands of users and 10 developers on the team, but that's way past the stage I'm more interested in. I'd love to see, for example, what DropBox looked like when they just had a prototype.

Reiterating the already made comments above, here is what investors typically value most from greatest to least:

1. Fully functional MVP with paying/profit-inducing users

2. Partial MVP with paying/profit-inducing users

3. Full or partial MVP with real users

4. Full or partial MVP with beta users

5. Full or partial MVP (the real product) with no users

6. Interactive prototype

7. Wireframes and mockups

8. Powerpoint slides

The closer you can get to the top of the list, in general the more motivated an investor will be. Of course, this is real life and you can't just jump to position 1 or 2. For this reason, if you are only at a position 6 to 8, it is often better to focus on pitching technical cofounders first, getting to at least position 5 or higher, and then pitching investors.

A barely working proof of concept is just as much vapor as a PowerPoint deck. The difference is that investors will have a lot more confidence that you are serious if it's an app, even if that app has no more functionality than a slide deck.

So tailor the level of effort to the investors you are talking to. In my experience, less experienced investors are more easily impressed by a simple app, where more experienced investors will see it for what it is - glorified PowerPoint.

The more complete (not complex) the prototype the better. Otherwise it's going to be a struggle communicating just what it is you do using powerpoint alone.

In my experience, the shorter amount of time it takes to get to the demo the better. In my most recent startup, we raised our first round without a powerpoint presentation whatsoever, it was all about the product and the story.

In my opinion, product is the best pitch.

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