There is a time and a place for both, with option number 2 coming first.

When you are first interviewing your target customers you really want to gain a deep understanding for their pains and a sense of empathy for how their pains rank on the totem pole of "I will pay you money now to solve this problem" to "It sucks.. but the system we have now works".

Once you've had those first round of interviews go back to them with a prototype (this can be paper, or just marketing material) and have another conversation. It's a great way to start building a solution people will actually care for, and build a small customer base at the same time.